Jeremy Hunt has abolished the lifetime allowance in today’s Budget, as part of a range of measures designed to keep older employees in the workforce.
The lifetime allowance, which was previously just over £1m will now be abolished, enabling people to save unlimited amounts in tax-efficient pensions.
The chancellor has also also increased the annual allowance — up from £40,000 to £60,000 a year. The money purchase annual allowance (MPAA) which applies once people have taken benefits from a DC scheme has also increased from £4,000 to £10,000.
Announcing the changes Hunt said that they were designed to stop senior doctors leaving the NHS, but he added that there were wider implications across different sectors.
He said: “No-one should be leaving work because of tax implication on their pension.” He said these changes will lift thousands of people out of the “complexity” of pension tax rules.
It has been widely expected that Hunt would increase pension allowances, although most were expecting the lifetime allowance to be increased to £1.8m, not abolished altogether.
This changes is likely to make pensions more attractive particularly for higher earners as they can be highly tax efficient when it comes to passing on assets to the next generation.
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