inancial advisers fear the Chancellor’s surprise decision to scrap the Lifetime Allowance (LTA) at last month’s Budget may be a short-lived policy decision.
A punitive tax charge levied on those who build a nest egg worth more than £1,073,100, the LTA poses a financial planning dilemma for many advised clients. Years of ‘salami slicing’ meant the LTA had been cut by 40% from £1.8 million in 2011-12, although in a surprise move at last month’s Budget the government has now opted to reverse the trend completely and abolish the LTA.
While the news came as a welcome simplification of the UK pension tax system, there are already questions over whether the policy will last. Labour has pledged to reverse the change were it to win the next General Election, with Shadow Chancellor Rachel Reeves describing the measure as a ‘Tory tax cut for the rich’.
A survey of advisers conducted by AJ Bell shows that the majority of advisers (72%) expect a future government to re-introduce the LTA in some form.
A further 19% said they thought it was a possibility, while just 5% don’t believe a future government is likely to bring back the LTA and 4% felt unsure.