Commenting on the proposed changes to the Lifetime Allowance (LTA) Claire Trott, Divisional Director of Retirement & Holistic Planning at St. James’s Place, said:
“The removal of the penal tax charges in relation to benefits in excess of the Lifetime Allowance has been welcomed by both providers and clients, but there is more to come to actually abolish the term Lifetime Allowance (LTA) as promised. It would be wise to delay changes to regulations, due to be published shortly, until 2025 otherwise rushed changes could cause unintended consequences particularly for those accessing their benefits or leaving money to their loved ones after their death. Currently the second part of the policy change, which abolishes LTA entirely, has not yet been published and is currently due to come into effect on 5th April 2024 giving little time for any further consultation and for providers and advisers to be in a position to ensure clients can make informed decisions.
“Even these changes proposed will not remove all the tests on benefits that have been saved and there will still be limits on the amounts that can be taken tax free as a lump sum and paid out on death or in ill health. Confusingly, these numbers are planned to be the same as the current LTA, but will create even more complications especially for those who have already taken some benefits. Providers and clients will still need to deal with issues such as what they took previously, if they have lifetime allowance protections and even the taxation of benefits taken in excess of these new limits.
“If the implementation date remains as 2024, the timescales for making these changes only gives four months to get the details right. As the proposed changes will impact a wide range of areas, this makes it difficult to get clients in the best position to take benefits in the most tax efficient way. Furthermore, the changes need to make clearer that even with the LTA being abolished, this doesn’t remove all the tests on benefits that have been saved, and there will still be limits on the amounts that can be taken tax free as a lump sum and paid out on death or in ill health.”