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In the spring budget, the Government froze the Lifetime Allowance on pensions until the 2025/26 tax year. As many pension savers may not be aware of what the Lifetime Allowance is and whether it will impact their retirement savings, here we’ve looked at who the Lifetime Allowance will impact and how pension savers can lock into a higher amount.
What is the Lifetime Allowance?
The Lifetime Allowance is a maximum amount that can be saved into a pension over a lifetime without incurring a tax liability. The current limit is £1,073,100 and during the budget, the Government said that this amount would be frozen for five years. Prior to the freeze, the Lifetime Allowance was expected to rise each tax year at the rate of inflation. Although even at its frozen limit the majority of pension savers will unlikely have to worry about paying tax on savings above the Lifetime Allowance, the rising rate of inflation, as well as the possibility of high investment growth in the next few years, could mean that some pension savers may see their savings exceed the limit.