Industry experts have highlighted recent issues around the abolishment of the lifetime allowance (LTA) as demonstration of the need for stability in pensions tax legislation, with a “long list” of changes still needed to implement the new tax regime.

The Finance Act 2024 delivered an amended pensions tax regime, effective from 6 April 2024, in which the LTA on most pension and lump sum benefits was replaced by two new allowances on most lump sum benefits.

However, LCP pointed out that whilst the Act of Parliament running to more than 100 pages has been passed to implement the change, it has been found to be incomplete in some areas and not correct in others, requiring secondary legislation to rectify both.

Indeed, industry experts warned at the time that this was a "rushed job with errors and omissions coming to light, resulting in HMRC having to now engage in a patch and mend job through regulations that are promised".

HMRC itself also suggested that some members may wish to delay transferring their pension or taking benefits until amending legislation on the abolition of the LTA is effective, prompting further concern from industry experts.

HMRC have since kept the industry updated by regular newsletters, with its latest newsletter revealing two new errors in the legislation, as well as a "lengthy" separate document on a variety of aspects of the new pension tax regime, including a number of promises to fix errors or omissions in the act.

However, LCP pointed out that, "worryingly", HMRC has given no indication of a firm end date by which all of these changes will have been made.

LCP also identified more than a dozen separate areas where HMRC is promising further changes to the rules, including measures to protect members with ‘scheme-specific’ protection, as well as changes to enable members with enhanced protection to be able to transfer to a new provider and not lose this valuable protection.

Given this, it emphasised the need for greater stability in the pensions tax regime, arguing that pensions tax should not become a "political football.

LCP partner, Alasdair Mayes, said: “Despite over a hundred pages of legislation, we still do not have final legal certainty on exactly how the abolition of the LTA will be implemented.

“There remain far too many unanswered questions, despite the fact that the LTA officially ceased to exist several weeks ago.

"We appreciate that HMRC is doing its best and is having to cope with a timetable driven by policy makers, but this whole experience shows why we need stability in pensions tax legislation.

“It is to be hoped that pensions tax does not become a political football. A worrying number of people in their late 50’s and early 60’s have already left the workforce and further changes to pension tax relief won’t just cause disruption to members and pension providers but also risk making the situation worse”.

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