Boris Johnson's promise to fix problems with the Lifetime Allowance (LTA) should cover all pension savers in the UK, not just NHS doctors, says Salisbury House Wealth.
Johnson pledged to find a solution to the NHS pension crisis, in which staff are being hit by a punitive tax charge when they breach the LTA, resulting in doctors reducing their shifts and waiting times increasing.
However, Salisbury House Wealth managing director, Tim Holmes, has urged the incoming chancellor to make this a priority and to include all savers in the UK.
He said: “The LTA tax is now a major problem – creating a huge penalty for people who are saving.”
“It’s not the super-rich that are being hurt by this tax. A lot of middle England that aren’t seen as very affluent have been hit by this tax.”
The LTA was reduced from £1.5m to £1m between 2014 and 2017. For 2019/20 the LTA is £1.055m.
Savers who breach the LTA face a 55 per cent charge on the amount that exceeds the limit if its taken as a lump sum, and 25 per cent if taken as income.
HMRC collected £102m through pensions tax in 2016/17, up by 55 per cent on the previous year.
Holmes added: “When the government started cutting the lifetime allowance, I’m not sure they realised what problems they were going to cause.
“The annual limits on how much individuals can put into their pensions also needs to be looked at.
“The self-employed have volatile earnings and they need to be allowed to save as they want in good years – but the rules are now too restrictive.”
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