In the budget on 15 March 2023, the chancellor made a number of changes to pension tax allowances.
The Government previously placed a limit called the Lifetime Allowance (LTA) on the amount of tax-relieved savings you could build up over your lifetime. If you exceeded the LTA, you had to pay a tax charge. The Government has removed the LTA charge with effect from 6 April 2023 and is expected to remove the LTA from legislation from 6 April 2024.
If you are still paying into a pension, the Government has raised the amount of tax-free pension contributions you can make.
Tax-free cash lump sum at retirement
When you take your benefits, you can take a tax-free cash lump sum of up to 25% of the value of your pension. A limit of £268,275 now applies to this lump sum. If you previously had a form of LTA protection, this may protect the value of the tax-free lump sum amount you can take at retirement.
If you think you may be affected by these changes, you should consider speaking to an impartial FCA-regulated financial adviser.
You can find out about choosing a financial adviser by visiting MoneyHelper at: www.moneyhelper.org.uk. MoneyHelper is an organisation that provides guidance free of charge on issues relating to money and finances.