The pensions lifetime allowance is proving the biggest source of confusion among advisers, as they try to effectively plan for clients, says Royal London.
According to the pensions and investment mutual, the five most asked questions to the group’s technical team revolve around the lifetime allowance.
Questions included:
- Will the lifetime allowance 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 lifetime allowance in the 23/24 tax year?
- How will Pension Commencement Lump Sum or the tax-free element of an Uncrystallised Funds Pension Lump Sum be tracked?
- What is happening with death benefits, particularly in relation to beneficiary drawdown for those under 75?
Clare Moffat, pensions expert at Royal London, said advisers find it difficult to advise clients without the full information from the government regarding the changes to the LTA.
“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,” she explained.
Moffat said the upcoming Autumn Statement is also driving more advisers to get in touch amid growing concern there will be more changes to come.
“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,” she added.
