Chancellor Philip Hammond has not made any cuts to the pensions allowances in his Budget, today 29 October.
Experts had warned that Hammond could make cuts to the lifetime or annual allowances, as a way to find extra funding for the NHS. However, in background documents published following the Chancellor’s Budget, the Treasury revealed the lifetime allowance is set to increase in 2019/20.
“The lifetime allowance for pension savings will increase in line with CPI for 2019-20, rising to £1,055,000,” the Treasury stated. The increase is in line with September’s CPI inflation figure of 2.4 per cent
It is an increase of £25,000 as the lifetime allowance currently sits at £1.03m.
It was also confirmed in a policy costing document, published by the Treasury, that the annual allowance will remain fixed at £40,000 for the next financial year, along with the money purchase annual allowance at £4,000 and the tapered annual allowance threshold at £150,000.
Royal London director of policy, and a former Pensions Minister, Steve Webb said it was the Chancellor’s “windfall” from better-than-expected borrowing forecasts, which meant he did not have to cut back pension tax relief in this Budget.
“But having described the system as ‘eye-wateringly expensive’ it is likely to be only a matter of time before this Chancellor – or his successor – comes back for more. Today’s respite for pension tax relief is likely to be only temporary,” he added.