UK pensioners could save up to £15,000 in tax if they are able to wait for the lifetime allowance (LTA) to rise again in April 2019 before crystalising their pension benefits, says Rachel Vahey, product technical manager at platform Nucleus.
Speaking to International Adviser, Vahey explained that the increase in the LTA in April 2018 took the allowance to £1.03m from its previous limit of £1m ($1.3m, €1.12m).
Introduced in 2006/07, the LTA was initially set at £1.5m and was expected to continue rising over time. However, it peaked in 2011/12 at £1.8m before being gradually cut back to £1m by 2016/17.
After the 3% increase in April 2018, the LTA is due to rise again in April 2019 in line with the consumer price index (CPI). The rise will be based on the September CPI rate, which will be revealed next month.
Based on recent data, Vahey expects it to be around 2.5%, as the rate has remained relatively unchanged in recent months.
This means that the LTA could be as high as £1.055m in April 2019, giving people who have reached the current limit more “wiggle room” and potentially save around £15,000 in tax, she told IA.
Blood-curdling budget
This, of course, is all dependent on chancellor Philip Hammond refraining from the tweaking that was so prevalent under his predecessor, George Osborne.
Hammond has proved quite restrained when it comes to tinkering with pension rules.
However, he does have a budget date set for 29 October and the government has promised to put £20.5bn into the National Health Service by 2023/24 starting from April 2018.
Shifted from its traditional Wednesday slot in a bid to avoid clashing with Halloween; pensioners and industry will be hoping to avoid any frights.
