An increase to the lifetime allowance in line with inflation will be welcome news to those with defined benefit (DB) pensions, according to Vince Smith-Hughes, Prudential’s director of specialist support.
In documents released alongside the Budget, the Treasury said the lifetime allowance will rise from £1 million to £1.03 million for the 2018/19 year. This is in line with the consumer price index (CPI).
Smith-Hughes said this is good news for savers particularly those with final salary pensions.
‘Many more people will be subject to the lifetime allowance charge as many DB transfer values are approaching or over the lifetime allowance limit,’ he said.
‘It is critical advisers take this into account in their transfer decision. Encouragingly it is one of the common questions that come into the Prudential helpline, so it is clear many advisers are looking at the different aspects of this.’
For anything that goes over the lifetime allowance there is a 55% tax charge. This means the £30,000 increase to the lifetime allowance could help savers by £16,500.