When the Chancellor announced the lifetime allowance limit freeze in his Budget speech earlier this year, for it to remain at £1,073,100 until April 2026, there was a lot of doom and gloom. Some said it will make pensions less attractive. However, this view is open to debate.
The freeze shouldn’t put people off pensions: they are still far and away the most tax-efficient way of saving for retirement, especially considering the tax relief available on your contributions tax, as well as the freedom of choice you now have in how you access your pension when the time comes.
So, instead of thinking of the lifetime allowance freeze as a barrier or a problem, you should see nearing that limit as a trigger to consider your additional options. At this point, it would be useful to have a discussion with your financial adviser, get properly informed as to the details of your own circumstances, and ask questions such as: “Do I need to worry about this? If so, do I need to adjust my course?”
So what if you reach your allowance limit? As with all tax issues, it’s mainly about being aware of the situation, knowing what’s there and realising that you don’t necessarily have to solve the problem by yourself.
The most important thing is to start with the end in mind. Think about how you want your retirement to look, then you can consider the mechanics of how you might structure your income in retirement and how to save for it now. Many people these days are going to need a range of assets to draw from, of which their pension will be just one.
To receive a complimentary guide covering wealth management, retirement planning or inheritance tax planning, contact Peter Harding Wealth Management on 01202 830730 or email peterhardingwm@sjpp.co.uk
Peter Harding Wealth Management is a trading name of Peter Harding Practice Ltd.
This article is featured in the September edition of the Dorset Business Focus magazine. Read on the online version here.