Dons legend wrong-footed by 'surprise' change to pension tax

North-east money experts were taken aback by the chancellor’s move to abolish the lifetime pension allowance (LPA).

They had expected an increase in the annual allowance, which is rising by £20,000 to £60,000.

But they didn’t predict Jeremy Hunt would do away with the LPA in his Spring Budget today.

Mr Hunt said it would stop more than 80% of NHS doctors getting a tax charge.

Abolishing the LTA will mean that many people can continue to save for retirement and draw their pension more tax efficiently, without facing additional tax bills of 55%.”

Kevin Mackenzie, Acumen Financial Planning

Russell Anderson, the former Aberdeen FC captain now working for law firm Aberdein Considine as an independent financial adviser, said: “Rumours had suggested the chancellor may look to raise the lifetime allowance for pensions.

“But the decision to remove it completely it was totally unexpected.

“Whether this policy assists Mr Hunt in helping to keep doctors working remains to be seen.

“It is certainly a boost to those in a position to save larger amounts towards their pension, especially when they will benefit from 40% or 45% tax relief direct from the government.”

‘Massive unforeseen positive change’

Barry O’Neill, investment director for Carbon Financial Partners in Aberdeen, said: “Scrapping the LTA is a massive unforeseen positive change to pensions legislation.

“It will be widely welcomed by not only the recently retired senior health service employees who the government is targeting with this change, but by anyone who has been diligently maximising their pension contributions on an annual basis for many years.

“The 50% increase to the annual allowance will also be welcomed by higher earners who will now have greater flexibility to save more towards the retirement they are working hard for.”

Barry O’Neill, investment director at Carbon Financial Partners. Image: Michal Wachucik/Newsline Scotland

Mr O’Neill added: “We have yet to see the detailed proposals, so as with any news that appears to be hugely positive with no downside, we await the technical briefing to see if there is a sting in the tail. The devil is invariably in the detail.”

Paul Gibson, of Banchory-based Granite Financial Planning, said: “The increase to the annual allowance had been heavily predicted but the abolition of the LTA was quite unexpected and is to be welcomed.

“To limit how much an individual can both pay into a pension and take out was inherently unfair.

“With pension policy there is always a sting in the tale and the restriction of pension commencement lump sum (tax-free cash) to £267,275 adds more complexity.”

Paul Gibson, of Granite Financial Planning. Image: Michal Wachucik / Abermedia

Kevin Mackenzie, of Aberdeen firm Acumen Financial Planning, said: “We welcome the surprising news the government has decided to completely abolish the LTA.

“Introduced in 2006 at £1.5 million, the LTA steadily increased to £1.8m by 2010.

“Since then it has been subject to government reductions and a more recent freeze, and currently stands at £1.0731m. As a result, many more people saving for retirement have been impacted by higher tax charges.

“Abolishing the LTA will mean that many people can continue to save for retirement and draw their pension more tax efficiently, without facing additional tax bills of 55%.

“Coupled with the increase in annual allowance to £60,000, we now have a far more attractive pension framework.”