Confusion over the lifetime allowance (LTA) is generating more questions from advisers than any other topic at present.
Royal London’s technical team reviewed the queries it received following training sessions and webinars – and found this was the single biggest issue. It says the questions being around this issue reflect the difficulties financial advisers and pension advisers face when it comes to a range of pension planning issues.
It says since the Spring Budget and draft draft legislation announcing abolition of the LTA earlier this year, the five most asked questions to the technical team are:
- Will the LTA return if Labour come into government?
- Is there any point paying into a pension if a client is over the lifetime allowance?
- What is the impact of taking lump sums above the LTA in the 23/24 tax year?
- How will pension commencement lump sum (PCLS) or the tax-free element of an uncrystallised funds pension lump sum (UFPLS) be tracked?
- What is happening with death benefits, particularly in relation to beneficiary drawdown for those under 75?
Royal London pensions expert Clare Moffat says: “Our conversations have highlighted that, by far, advisers and their clients are more concerned about the uncertainty surrounding the lifetime allowance changes earlier this year than any other matter. Although we have some draft legislation, we are still waiting on more in relation to key areas of the removal of lifetime allowance. It’s difficult for advisers to advise clients when the full information isn’t available.
“With the upcoming Autumn Statement, more advisers are getting in touch as there is concern there will be more changes ahead. Clients who were previously restricted by the annual allowance may be thinking about paying an extra £20,000 a year into their pension, but uncertainty around the rules is seeing this being delayed. Advisers are seeking clarity, and this is needed quickly to enable effective planning for clients.
“Pensions freedoms had a huge effect on choices at retirement. However, the changes to lifetime allowance will have an equal, if not greater, impact on the way pensions work.”