Autumn Budget 2017: Increase to pensions lifetime allowance but little else for savers

Recent Budgets have resulted in perpetual change to pension legislation. However, today’s Budget was unusually quiet on pensions choosing to focus on housekeeping issues arising from previous Budgets and Autumn statements.
In the Summer Budget of 2015, the Chancellor announced that the pensions lifetime allowance was being reduced from £1.25m to £1m with effect from the 2016/17 tax year. However, it was overlaid with the announcement that the intention was for the £1m limit to increase annually in line with CPI.

Speculation was rife that this increase would not go ahead so today was a positive, albeit not exceptional, change to recent trends. The 2018/19 tax year will see the first of these planned increases to the lifetime allowance with the Chancellor confirming that the lifetime allowance for the 2018/19 tax year will be £1,030,000.

This is important from the perspective of individuals accumulating pension savings and who may be approaching this limit, as well as those who are considering taking pension benefits.

For those who exceed the lifetime allowance, there can be a tax charge of up to 55% of the excess over the allowance depending on how the monies are withdrawn. As such, the £30,000 increase to the lifetime allowance could help savers by £16,500 if they are taking or can postpone taking, their benefits post 5 April 2018.

The Budget was also underwhelming on other traditional saving vehicles for investors. The ISA annual subscription limit for 2018-19 will remain unchanged at £20,000, but the annual subscription limit for Junior ISAs and Child Trust Funds increases in line with CPI in the 2018-19 tax year to £4,260.

Pensions and ISAs are often the foundation stones of one’s financial planning but regular changes have been made to pension allowances in particular. As such, it is important to ensure that opportunities are taken to optimise one’s position and consider the timing and method of withdrawing pension monies.

Further information on the impact of the Budget can be found here.
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