Pension savers urged to act as pension lifetime allowance removal comes into force | Personal Finance | Finance

Pension savers have been urged to check if they are affected by a key policy change.

The pension lifetime allowance (LTA) was removed at the turn of the tax year earlier this month.

Under the previous allowance, a person could save up to £1,073,100 into their private pensions and not pay tax, with the policy to be scrapped from April 2024.

The change means income and lump sums from pensions valued above the LTA will be subject to income tax at the beneficiary’s marginal rate.

But Steven Cameron, pensions director at Aegon, warned that how the new policy will work is still being set out.

He told Express.co.uk: “There are extremely complex transitional arrangements and the tax authorities are still communicating the details.

“So although the lifetime allowance has been abolished, the details of what’s replaced that are not all finalised.

“Anyone who is concerned about this really should seek advice. Hopefully, the abolition will work in their favour but there’s lots of bear traps along the way.”

However, experts previously said the change could benefit all pension savers. Tom Selby, director of public policy at AJ Bell, said: “Savers in all types of pension scheme stand to benefit, with those accessing a defined contribution retirement pot only having to pay income tax on withdrawals.

“The end of the lifetime allowance does not, unfortunately, mean the end of complexity, because two new lifetime limits will be introduced in its place.

“These new allowances are designed to limit the pension tax-free lump sums people can receive in life and the tax-free lump sums they can pass onto beneficiaries when they die.”

Another key pension change coming in from this month is the increase to the state pension, with payments going up 8.5 percent.

Under the new rates, the full basic state pension is now £169.50 a week while the full new state pension is £203.85 a week.

A person can check how much state pension they are on track to receive using the Government’s state pension forecast tool.

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