Reduction in Pension Allowance
The total amount of pension savings that can be accumulated tax efficiently (known as the Lifetime Allowance) is to be reduced again. The new limit will be £1.25 million, down from the current £1.5 million. This represents a drop of almost one third in just two years, from the original limit of £1.8 million in April 2012. Individuals can save as much money as they want to in a pension pot, but the Lifetime Allowance caps the amount which is treated tax free. When the new legislation takes effect, amounts above £1.25 million will be subject to tax of 25% if taken as income, or 55% if taken as a lump sum. The new limits will come into force from 5th April 2014. Two forms of transitional protection are available, for those who are concerned about the new limits.