2023 Budget Press Release

PMI President Sara Cook commented: “When inflation is taken into account, the current rate of Lifetime Allowance (LTA) is worth just 51% of the original value when the current tax regime was introduced in 2006. Abolishing the LTA will allow savers to accrue more for their retirement without suffering any tax penalty. Nobody will in future be forced out of work by the pensions tax regime.”

Chancellor Jeremy Hunt also announced welcome changes to the Annual Allowance (AA) and reforms to the Money Purchase Annual Allowance (MPAA).

Sara Cook said: “The Annual Allowance (AA) has been frozen at £40,000 for many years and an increase has been long overdue. We are greatly encouraged that the Chancellor has recognised this and the new value of £60,000 will give savers far more scope for preparing for their retirement.

“Increasing the Money Purchase Annual Allowance (MPAA) to £10,000 will be welcomed by older people who were considering a return to work after having started to draw benefits from a Defined Contribution (DC) pension arrangement. This will allow expanded scope for making additional contributions to a DC pension scheme after benefits have commenced and so help incentivise those older people to return to the workplace.”

However, Sara Cook also rued a missed opportunity: “Additionally, having abolished the LTA, the Government could have abolished the Tapered Annual Allowance (TAA), which continues to be unpopular throughout the pensions industry and also among the general public. As Chancellor, Rishi Sunak changed the TAA thresholds to levels that only affect a tiny percentage of pension savers. The tax revenues gathered through the TAA must now be so small that its retention seems hard to justify. The Chancellor has missed an opportunity to abolish a measure that has few admirers.”