Commenting on the freeze of the Pensions Lifetime Allowance announced in today’s Budget, Chris Noon, Partner, Hymans Robertson says:

“Freezing the Pensions Lifetime Allowance until 2026 is quite simply a kneejerk reaction by the Chancellor for short term financial gain and comes just 3-years after the Government committed to increase it in line with inflation. It is bitterly disappointing to see him renege on this promise so soon and viewing those impacted by this change in pensions tax policy as necessary collateral damage. 

“We remain worried that the Treasury has far too short a memory; it has spent years tinkering at the edges of pension taxation policy and should have learned that decisions such as this can lead to damaging unintended consequences. Back in 2016 another kneejerk introduction was the tapered annual allowance which eventually led to senior doctors, amongst other affected groups, refusing to do additional shifts. These 2020 pandemic heroes are likely to be massively impacted by this freeze. This hasty move to reap short term financial benefit for the government could be detrimental for those who we valued most during Covid-19. For the level of political fallout that is likely to emerge, it feels like it the government really shouldn’t have made this decision.

“The taxation of pensions needs a fundamental review and the Treasury must resist this continued temptation to simply ‘tinker’. The inequities that remain in place must be addressed, alongside the unforeseen financial implications of Covid-19. Rather than penalise our pandemic heroes with rushed policy changes, they should work with the DWP and pensions community to develop.”