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What you putteth away for later, the chancellor taketh back sooner. After the last Budget, that’s the scenario facing diligent pensioners who’ve saved hard for their retirement.
If LTA sounds to you like the name of a corporation bus company from the seventies, then you’re probably from a time when you had to bow your head when you went upstairs, and the conductor gave change from a leather satchel. You started saving towards your pension too, except for the trip down to the Record Exchange, where you blew some cash on Led Zeppelin’s Physical Graffiti – one of the best albums of 1975 in our opinion.
Spool forward forty years, and the corporation public transport has been long since deregulated and bought up by a Scottish mega operator. You might still be a bit of a rocker, but 1975 isn’t a year anymore, it’s a band, and you download their latest hits from Spotify. You’ve moved with the times and, in these times, the LTA acronym that most interests you is Lifetime Allowance.
The problem is that the LTA was changed again by the Chancellor at the last Budget in what many are calling a stealth tax move. The allowance has now been reduced further from £1.25m to £1m, which will hit diligent pension savers. It may seem like a big number, but it’s not so hard to reach that figure if you’ve been saving since tartan trousers were worn by the Bay City Rollers.
Essentially the change in LTA means that if the value of your pension pot goes over £1m then you get taxed more when you draw a pension from the fund to claw back some of the tax relief you got when you made your initial contributions. In other words you are penalised if your pension pot is properly invested and increases in value over the years.
There’s a sense of anger among the professions, and many are seeing this as a tax grab that really does punish the savers and those who’ve made provision for themselves. Chas Roy-Chowdhury of the accountancy body, the ACCA noted that the Chancellor should exercise caution when meddling with the pension pots of those who have been contributing to them for thirty to forty years.
At Springfords we’re across the situation as it develops. Already there are efforts being mounted to get the Chancellor to review this decision. The consensus is that rather than base the penalty on the value of the pension pot, it would be more fairly applied to the value of the actual contributions you have physically paid into your own scheme instead. That seems to us to be much fairer … we’re sure you agree too!