The majority (72 per cent) of advisers expect a future government to re-introduce the lifetime allowance (LTA) in some form, research from AJ Bell has revealed, prompting renewed concerns over the uncertainty facing savers.

The survey found that a further 19 per cent of advisers thought it was a possibility that the LTA would be reinstated, while 5 per cent don’t believe a future government is likely to bring back the LTA and 4 per cent felt unsure.

In anticipation of this potential political flip-flopping on pension taxation, more than half of advisers surveyed also said that they expect at least some clients to crystalise before the next general election in an effort to mitigate any change in legislation.

Alongside the removal of the LTA, the Spring Budget also saw the Pension Commencement Lump Sum (PCLS) capped at the 2022/23 tax year amount, meaning that going forward, most savers will be limited to a maximum tax-free cash withdrawal of £268,275, with separate rules put in place for those with enhanced protections.

When asked if they expected the cap on tax-free cash to remain, advisers were split with 55 per cent stating that they expected it to remain unchanged, while 19 per cent expected it to be cut and 11 per cent thought it could increase in future.

Commenting on the findings, AJ Bell head of policy development, Rachel Vahey, stated: “The budget changes have – in a single stroke - removed much of the complexity in pensions.

"It should now be easier for clients to understand their pension saving choices, especially those with larger funds who are bumping up alongside the old lifetime allowance.

“But this positive development risks being shattered by the political uncertainty surrounding the removal of the lifetime allowance. Advisers and their clients have been put in the unenviable situation of being piggy in the middle of a political pensions spat.

“The risk is a desire to outwit future changes drives clients’ choices on when to crystallise funds, rather than a balanced decision based on the current situation and what is best for them and their families.

“It’s unfair to thrust advisers and clients into this bubble of uncertainty. I hope that all political parties open up communication with the industry, so collectively we can reach a position all support, and, importantly, advisers and their clients can trust won’t change overnight.”

Share Story: