Taxman to take £6bn from pensioners

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Taxman to take £6bn from pensioners

Pension savers are set to lose out on billions of pounds through a hefty tax, as a key allowance on saving has been frozen.

While pension saving can be useful for retirement, there are rules people will need to bear in mind, such as the Lifetime Allowance. This allowance puts a limit on how much a person can save throughout their lifetime without facing tax charges.

The Lifetime Allowance is currently £1,073,100, which may seem substantial to many. However, some savers may find themselves propelled over this sum due to the Chancellor’s decision to freeze the Lifetime Allowance for five years. The sum will remain at its current level until April 2026, after Rishi Sunak made the announcement in last year’s Budget.

Analysis by Aegon has showed the extent of the issue. It is thought a saver who withdraws cash in a lump sum will lose an extra £180,125 to the taxman by 2025. The figure represents the tax payable on the difference between the frozen lifetime allowance and the £1.4million had the sum been unfrozen.

As incomes grow and investments rise over time, Britons could inadvertently find themselves brushing up against the limit, or exceeding it totally. As a result, individuals will want to keep an eye on their pension and perhaps consider other savings options to use alongside it.

 

Essential Wealth Management
1-2 Great Farm Barns
West Woodhay
Newbury
Berkshire RG20 0BP
Tel: 01488 669840
Fax: 01488 669216
Email: [email protected]

Essential Wealth Management is a trading style of Essential Wealth Management and Advice Ltd, registered in England Number 04020006. Registered Office: 1-2 Great Farm Barns, West Woodhay Newbury, Berkshire, RG20 0BP. Essential Wealth Management and Advice Ltd is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited which is authorised and regulated by the Financial Conduct Authority.

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Approved by the Openwork Partnership on 13.10.2023