The widely trailed changes to pension tax allowances were officially unveiled today as part of the Spring Budget, with the surprise announcement that the lifetime allowance (which is the amount of pension savings that receives favourable tax treatment over a person's lifetime) will be abolished from April 2034.

Under the changes the lifetime allowance charge will be removed from April 2023, with the lifetime allowance being entirely abolished from April 2024. From April 2023 the annual allowance will move from £40,000 to £60,000 and the money purchase annual allowance, being the annual amount a person can contribute to a money purchase pension scheme tax free where they have already accessed their benefits, will increase from £4,000 to £10,000.

Broadly the changes are designed to encourage high earners, in particular senior doctors and civil servants, to work longer and discourage them from early retirement. Whether the measures will be enough to change individuals' retirement planning remains to be seen. Conversely allowing individuals to save more now may result in them reaching pension savings targets earlier and choosing to retire early.

For sponsoring employers and trustees of pension schemes there are a number of implications to work through, including ensuring that pension scheme rules reflect the revised tax landscape and assessing the impact of the changes on any cash alternative arrangements in place for individuals with various forms of lifetime allowance protections.

Please get in touch with your usual Womble Bond Dickinson Pensions team contact if you would like any further information on these issues.