There is to be a rush to review retirement savings plans following Chancellor Jeremy Hunt’s game-changing Spring Budget that abolishes an unpopular allowance, the CEO of a leading financial advisory and fintech said on Wednesday.
He says: “The Chancellor delivered a Budget that is going to considerably ease the pension tension by abolishing the Lifetime allowance (LTA),” said Nigel Green of deVere Group, explaining that the allowance, which is the maximum people can contribute to a pension, was set at £1.07 mln before facing tax charges.
The LTA was originally set at £1.5 mln when it was introduced in 2006. It steadily increased to £1.8 mln in 2010, but fell to £1 mln in 2016.
“Following years of successive cuts and stagnation, the Budget announcement is a game-changer. We welcome the scrapping of the LTA, which discouraged individuals to save for retirement,” said Green.
He said this development serves as an incentive to save as much as possible for retirement, as well as encouraging older people to return to the workforce, thereby boosting Britain’s chances of long-term economic prosperity.
“It also highlights that retirement finances are increasingly a personal responsibility,” said Green.
Unable to support and provide
“It’s becoming clearer that the government won’t be able to support and provide for its citizens as it has done for generations before, due to an ageing population and shrinking workforce, weaker economic growth, rising living, health and care costs, less generous company pensions if they exist at all, and the fact we’re living longer, meaning that accumulated funds need to go further.”
The deVere chief executive said that moves to encourage personal saving, such as abolishing the LTA, must be championed.
“The Annual Allowance, which is the most a worker can save in their pension pots in a tax year before paying tax, has also gone up to £60,000 from £40,000. This will incentivise saving for the future which, again, must be applauded.”
Green added that this landmark budget will prompt many individuals to rush to review their retirement savings plans – and not just in the years ahead, but also in this current financial year.
“We expect a huge surge in enquiries from clients as they, sensibly, reconsider their strategies to take advantage of the scrapping of the lifetime allowance,” he concluded.