Summer may be here but what about the LTA freeze?

By FMB on 

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The sun may be shining (if the Great British summer permits!) but the Lifetime Allowance (LTA) freeze is most certainly here.

The pension LTA has been frozen at its current level of £1,073,100 until April 2026. So essentially, the total amount you can hold in your pension without being taxed on withdrawals is static for the next few years, which means that a growing number of people may need to start considering a wider range of savings options for retirement, in order to avoid a potential tax bill. Tax is currently payable at 55% on everything over the limit if you take the money as a lump sum, or 25% if you take the money in another way, such as drawdown or through an annuity. If you’re nearing the LTA, and an increasing number of people will be in this situation due to the big freeze, it’s worth considering additional options available to complement saving for retirement.

There are a whole host of scenarios and outcomes depending on your personal circumstances. The calculations around pensions and the LTA can be very complex so careful consideration of your options is essential before making any decisions. As always, our Financial Planners are on hand if you would like to discuss what implications this could have on your retirement plans.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

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