Prior to the Budget there was speculation that the Lifetime Allowance would be increased to £1.8M in a move aimed at preventing many professionals including doctors from retiring early. It was also trailed as an attempt to encourage the over 50s to work for longer and reverse the early retirement trend.
The current lifetime pension allowance is £1.07M. This means that those with a pension pot only pay tax after this threshold has been reached. Your pension provider will deduct the tax before you start getting your pension.
Jeremy Hunt, in his Budget speech, included a surprise announcement saying the lifetime allowance would be abolished completely. The chancellor said he had “listened to the concerns” of senior NHS doctors who say pension tax charges are “making them leave the NHS”.
I do not want any doctor to retire early because of the way pension taxes work. Some have also asked me to increase the lifetime allowance … But I have decided not to do that. Instead I will go further and abolish the lifetime allowance altogether.Jeremy Hunt
The chancellor also announced that the annual pensions tax free allowance will be increased. The amount of pension contributions that can be paid into a pension pot each tax year before incurring tax will rise from £40,000 to £60,000.
Mr Hunt said:
As chancellor I have realised the issue goes wider than doctors. No one should be pushed out of the workforce for tax reasons.
To discuss tax relief on pension contributions or any pension related queries please contact Brian King