Summer may be here but what about the LTA freeze?
13/08/2021
13/08/2021
The sun may be shining (when the Great British summer permits!) but the Lifetime Allowance (LTA) freeze is most certainly here. The pension LTA has been frozen at its current level of £1,073,100 until April 2026. So essentially, the total amount you can hold in your pension without being taxed on withdrawals is static for the next few years, which means that a growing number of people may need to start considering a wider range of savings options for retirement, in order to avoid a potential tax bill.
Tax is currently payable at 55% on everything over the limit if you take the money as a lump sum, or 25% if you take the money in another way, such as drawdown or through an annuity. If you’re nearing the LTA, and an increasing number of people will be in this situation due to the big freeze, it’s worth considering additional options available to complement saving for retirement. There are a whole host of scenarios and outcomes depending on your personal circumstances.
The calculations around pensions and the LTA can be very complex. So careful consideration of your options is essential before making any decisions.
This article has been provided by Simplybiz. It is important to take professional advice before making any decision relating to your personal finances. Information within this newsletter is based on our current understanding of taxation and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. If you withdraw from an investment in the early years, you may not get back the full amount you invested.
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