The pension lifetime allowance is due to be abolished tomorrow (6 April 2024). But HMRC has advised some people to delay taking pension benefits until it fixes legislation.
The lifetime allowance is the maximum amount you can save into a pension without having to pay an additional tax charge. It currently stands at £1,073,100, but Chancellor Jeremy Hunt announced in the March 2023 Budget that it will be scrapped from 6 April 2024.
However, the legislation for the rule change was being pushed through in quick timescales, and experts say there has been insufficient time to deliver a change of this magnitude.
In a newsletter sent late last night (4 April), two days before the lifetime allowance will be scrapped, HMRC suggested people should hold back on taking benefits until it pushes the relevant regulation through Parliament.
HMRC says this is any case that involves:
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- scheme specific tax-free cash protection
- a transfer of a case with enhanced protection
- enhanced protection and primary protection cases with protected lump sum rights of more than £375,000
- the payment of a lump sum death benefit from funds that crystallised prior to 6 April 2024
- any transfer from drawdown to a QROPS
- any transfer to a QROPS that involves pre-April 2006 benefits
While this will only affect a minority of people, some may be reaching their intended retirement age or have made plans to take benefits.
Andrew Tully, technical services director at Nucleus Financial, said: “To suggest at such a late stage that people should delay taking benefits or transferring shows how poorly these changes have been implemented.
“We are only a few days away from implementation, so some advisers and customers will have made plans and committed to use funds. Now HMRC is effectively delaying payments to customers or stopping them taking certain actions whilst it fixes incorrect legislation. It’s a bit of a shambles.”
