Since 2010, the amount you could save into a pension over your lifetime has been steadily reduced – capped at an annual allowance of £40,000 and a total of £1 million.
Many predicted that these figures would be further fiddled with in today’s Budget announcement, but instead allowances went unscathed, rising in line with inflation to bring the lifetime allowance to £1,030,000.
“Fortunately there was no U-turn in the Lifetime Allowance increase which has been confirmed to increase to £1,030,000 from next April. Following a series of reductions, this is good news for savers, even if on the surface the increase isn’t large,” said Kate Smith, head of Pensions at Aegon.
Les Cameron, retirement expert at Prudential confirmed the increase would mean a saving of up to £16,500 for those with large savings.
It was a pensions-light Budget, instead focussing on pledges designed to appeal to younger voters; Stamp Duty abolition, house building and tax freezes on fuel and alcohol. But there was confirmation of the planned rise in the State Pension to £164.37 from April giving pensioners an annual rise of £250.
Tom McPhail, head of policy at Hargreaves Lansdown said it was a case of no news is good news for pension investors – but that investors should expect further changes in the future.
“Higher rate relief in particular is still likely to be scrapped as soon as a government feels it is strong enough to do it; in the mean time investors can make hay while the sun shines,” he said.
Rachel Vahey, product technical manager at Nucleus called the lack of pension policies “unprecedented”, and suggested the Chancellor had listened to retirement savers’ prayers by leaving allowances alone.
Vahey drew attention to the potential of investment returns for pension funds backing long-term innovation – a key theme of the Budget report, which referenced electric vehicles, fibre broadband and tech start-ups.
“Phillip Hammond did announce in his speech pension funds would have access to long-term investments. The government will give pension funds confidence they can invest in assets supporting innovative firms. However, we await guidance from the Pensions Regulator which is needed to clarify exactly which investments can be considered,” she said. “The Treasury no doubt hope this could provide more stimulus. However, trustees will still need to decide whether this is the best investment for the profile of their membership.”
