Why do the government keep reducing the pension Lifetime Allowance? They repeatedly ask us to save more for retirement but then keep capping how much can be put into pensions! Sounds bizarre … but is it?
Well, not for them! The reduction in the Lifetime Allowance has led to a 2100% increase in the government’s tax income compared with the same income in the 2006/2007 tax year. As the allowance drops further, more people are being hit by the severe tax charges for exceeding the allowance.
Many of us may feel the £1 million allowance is not something we may ever reach or exceed. However, over many years, and taking into consideration tax-free growth and the reinvestment of interest, this situation is becoming more and more of a reality for many of our clients. This means that it is sneaking up on people, so they may not realise they are close to or over the allowance limit until it is too late.
That is why it is important to plan, to make use of other allowances and to apply for the available protections if you can (details of which can be found here: https://www.gov.uk/guidance/pension-schemes-protect-your-lifetime-allowance).
A retirement plan that incorporates all of your assets and takes into account all of your individual circumstances is something we help people achieve every day, so if you need help then let us know and avoid paying over the odds on your pension income.