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Budget 2021: Freeze on lifetime allowance

hm treasury

The Chancellor announced that the lifetime allowance will be frozen until April 2026 at its current rate of £1,073,100 instead of increasing in line with inflation.

The allowance is a limit on the amount of pension savings which can be accumulated overall without triggering a tax charge.

Individuals in defined benefit schemes such as the NHS pension are worse hit by the tax limits due to the nature of saving into the pension over several decades. Pension savings above the lifetime allowance incur punitive tax rates of up to 55 per cent on anything taken as a lump sum or 25 per cent on top of marginal rates of income tax if taken as income.

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