New lifetime allowance could cost savers billions
A reduction in the lifetime allowance (LTA) for pension savings could cost savers billions in unexpected tax charges according to research from Standard Life.
The LTA – the maximum amount an individual can accrue in pension savings in their lifetime before triggering a tax charge – falls from £1.5 million to £1.25 million in April 2014.
HMRC expects 30,000 savers to be immediately affected by the change but says that 360,000 will be hit in the long term. Savers who exceed the new limit immediately could be liable for a 55 per cent charge on up to £250,000 worth of savings – a £137,500 tax bill.