Budget 2018: predictions, hopes and fears

By Cristian Angeloni, 25 Oct 18

With the Budget only a few days away, industry experts share their views on what to expect

Pension tax relief and lifetime allowance

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Pension tax relief and lifetime allowance

Several of our experts agree that one of the main areas to be reformed will be the lifetime allowance (LTA).

Rachael Griffin, head of trusts and technical solutions at Quilter, said: “The more likely reform is that the chancellor will lower the pension annual allowance to £30,000 ($39,000, €34,000).

“Generally this doesn’t directly impact expats, who can only claim relief on a maximum of £3,600 pa gross for the first five years of non-residency.”

Similarly, Steve Cameron, pension director at Aegon, said: “We hope the chancellor resists any further reduction in how much people can save each year into a pension, particularly given reports of an improvement in public finance projections.”

However, while Griffin believes they are going to replace “the lifetime allowance with a lower allowance and introduce a flat rate of tax relief”, Cameron thinks the chancellor – if, indeed, the Budget does reduce the allowance – “should […] make an equivalent increase to the Isa contribution limits. For example, £40k to pension and £20k to Isa could become £30k to each.

“This would mean the total people can save annually into a tax-incentivised savings vehicle remains unchanged at £60k.”

Some experts, like Sean Christian, managing director & executive director at Canada Life International, believe that there’s the need of a general review of the tax system. “A general review of some aspects of the UK tax system are overdue – take for example the personal savings allowance that was introduced – the application of this has confused tax advisers and this has not been helped by HMRC removing the guidance from its website.

“This can be a very useful allowance for international bond policyholders but it adds an unnecessary layer of complication to an income tax calculation when a chargeable gain arise. It feels that it was introduced without too much thought and clarity should be provided.”