Pensions - Articles - Comments on pensions LTA in the Autumn Statement


Hymans Robertson, Isio, PwC, and Standard Life all comment on the Chancellors freeze on the pensions LTA in the Autumn Statement

 Hannah English, Senior DC Consultant, Hymans Robertson comments: We recognise that the new Government has limited room to manoeuvre in raising additional taxation at this challenging time, but the lack of update in today’s Autumn Statement around the impact of pensions on certain industries – particularly the NHS - is short sighted. Past experience have shown that raising taxes via a lack of focus on long-term pension policies, can led to extreme political consequences.

 “Maintaining the lifetime allowance freeze to 2025/26 will result in a real-terms reduction of c60% or c£1.1m in the lifetime allowance since it peaked at £1.8m in 2011. For higher earners paying tax on pension savings above the lifetime allowance, is equivalent to c£275k in additional tax payments to the government. The current pension taxation regime is not fit-for-purchase and too open to tinkering and editing by the Treasury without longer term consideration. We would welcome the Government to review the pension taxation regime to remove the existing complications, encourage pension saving and distribute tax-relief more effectively – and would like to see this at the top of the Pension Ministers to-do list.”
  

 Iain McLellan, head of Research and Development at Isio said: While the government was clearly proud of its triple lock announcement, leaving it as a 'best 'til last' announcement in today's Autumn statement, we're disappointed that the Chancellor didn’t take the opportunity to address some of the thornier pensions issues.

 “Simplifying the current annual and lifetime allowance regime would help to reduce complexity and disincentives to saving for retirement. Additionally, we’d like to see increases in the level of tax relief on employer provided financial advice to encourage more companies to improve the financial wellbeing of their employees.
  

 Roshni Patel, DC pensions and benefits lead at PwC comments on the lifetime allowance: There was no further news on the Lifetime Allowance or Annual Allowance, suggesting they will continue to remain frozen for two more years. People’s pensions savings will start catching up with the frozen Allowance. It equates to £53,000 per annum for a Defined Benefit (‘DB’) scheme member, and would deliver less than that for a Defined Contribution (‘DC’) member, maybe around £45,000 depending on the going rate for annuities at the time of retirement. Apart from the disparity between DB and DC savers, these amounts might seem a lot but won’t feel like that in real terms at the end of the frozen period.

 “With the reduction in dividend and capital gains tax allowances, it does make saving into a pension or ISA more desirable, instead of holding investments directly.”

  

 Jenny Holt, Managing Director for Customer Savings and Investments at Standard Life said: “We’ve seen no movement in relation to the pensions lifetime allowance, despite speculation the freeze on the limit could be extended beyond 2026 as currently planned. With inflation at around 10%, the lifetime allowance of £1.073m has effectively lost £107,300 of value in real terms in the last year alone.
 
 “While a savings limit of over £1m sounds like a huge sum, many middle earners who save regularly over a lifetime will eventually hit the limit which punishes people for doing the right thing and preparing for the future.
 
 “The effects of the policy are particularly noticeable in the NHS where an exodus of senior staff is being linked to pension tax bills and in September the former health secretary set out measures designed to help retain higher earning NHS employees facing this challenge. If current rates of inflation continue, the current freeze is likely to come under more pressure as more and more people are brought into scope.”
  

 
  

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