Pension lifetime allowance: Boris Johnson told cap ‘should be abolished’

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The UK economy is undergoing a chaotic period, with inflation soaring and the country still recovering from the peak of the pandemic. In the last financial year, government borrowing reached £323billion – the highest annual figure since records began in 1947. In March’s Budget last year, Chancellor of the Exchequer Rishi Sunak announced the pension lifetime allowance will be frozen until 2026. But some have argued that the pension lifetime allowance creates unnecessary challenges for savers.

Baroness Ros Altmann told Express.co.uk this week that the lifetime allowance should be abolished.

She said: “I am actually in favour of abolishing the lifetime allowance altogether.

“If we control and cap the amount people can put in each year, why do we punish them if their investments perform well, which is basically what the lifetime cap does.

“The lifetime cap is just a money making exercise for the Government, to get back some of the tax relief they gave people on the way in.

“However, it also makes it impossible for people to plan their private pensions – you don’t know what to do when you get nearer to the lifetime limit.

“If you keep on investing, you will go over the limit and pay a huge tax penalty. That’s ok if you have an employer contribution, but if its your own money it may be that that’s not sensible for you.

“If your investments perform particularly well, you may be frightened that that will lead you into tax. If your fund suddenly drops, you end up with much less pension than you planned for.”

Those with pension pots in the UK will also have been concerned by reports in the Telegraph in June, which claimed the Government is considering lowering the allowance threshold to as low as £800,000 or £900,000.

Nimesh Shah of Blick Rothenberg believes the lifetime allowance threshold will be reduced in the future.

He told Express.co.uk last month: “The lifetime allowance was frozen in March, and has been brought down from £1.8million. It has been constantly brought down.

“Now it’s at just over a million, and it is frozen at that level for another five years.

“I think that it is something which is attractive for the Government and I can see it coming down, definitely, in the future.”

Currently, 1.6 million savers in the UK have exceeded the £1.073million threshold, but with inflation rising, many more could be hit with bills.

The Bank of England’s monetary policy chief has said inflation is likely to soar “comfortably” above 5 percent next spring.

This could drag more private pensions into the tax net, but it could also mean the 3.1 percent increase for the state pension is not enough.

Baroness Altmann also told Express.co.uk that those reliant on their state pension will face a difficult 2022 after the triple lock was ditched.

She said: “We already know that pensioners were struggling to make ends meet if they only had the state pension payments, and given the rise of prices is effecting basic goods like food and energy, they will increasingly this winter will have to choose between keeping warm and keeping fed.

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“It could well cost lives.

“The fact is the Government have taken money off the poorest people in the country, and I don’t believe that is fair.

“I believe that is an absolute betrayal, I really do feel this was a very wrong decision.

“I hope the fuss we make this year will mean that this doesn’t happen again.”

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