Online pension provider PensionBee has issued a stark warning that today’s average employee is currently on track to exceed the current Lifetime Allowance of £1,073,100 by the typical retirement age of 64-65.
Many workers, they say, may be unaware of how much will be saved through auto-enrolment – and subsequently, run the risk of triggering tax penalties of up to 55 per cent on pension withdrawals.
PensionBee CEO, Romi Savova said: “While there are already sensible limits on how much an individual can pay into their pension each year, the current Lifetime Allowance limit punishes those who have saved diligently throughout their working life and contradicts the government’s message that everyone should be saving for retirement.
“A much more reasonable measure would be to eliminate the Lifetime Allowance and instead focus on the current Annual Allowance, where we see far fewer people contributing up to the threshold as a whole.
“As life expectancies increase, many workers will continue to contribute into their pension far beyond their working lives, so I would encourage all savers to keep a close eye on their contributions to avoid being penalised, while ensuring that they are saving enough to be able to enjoy a comfortable retirement.”
How can your RetireEasy LifePlan help you avoid incurring LTA charges?
At a very early stage, RetireEasy took the decision not to overcomplicate the LifePlan experience by adding dozens of additional questions in an attempt to evaluate who had what level of protection and what Lifetime Allowance tax charge may apply.
As a straightforward alternative, where a potential Lifetime Allowance tax charge may apply, a customer can simply allow for this as a “Future Cost”… whether it is a one-off charge at 55% or a regular charge at 25% if the excess pension fund is withdrawn as a pension.
LifePlan can also calculate when a pension fund may exceed a customer’s personal Lifetime Allowance in the future, and it allows customers to set an individual growth rates to be applied to a pension fund plus add future lump sum or regular contributions.
The downloadable summary shows at-a-glance the annual value of the pension fund so any threat of exceeding the LTA can be easily spotted allowing the customer to consider all options and to plan for any potential LTA tax charge.
Top tips for avoiding LTA charges
You can read a detailed article by Mark Soper ACII on measures to take to avoid incurring LTA charges by clicking on the link below:
https://www.retireeasy.co.uk/news/12-steps-stop-stung-lifetime-allowance-mark-soper-acii
__________________________________________________________________
If you have not yet tried RetireEasy, or if your subscription has lapsed, why not find out what inflationary pressures might mean for your retirement finances?
What’s more, RetireEasy LifePlan Classic costs just £5.99 per month and LifePlan Premiumjust £7.99: there is no contract and you can cancel at any time.
Annual plans are also available and offer a hefty discount to the monthly subscriptions – offering you one way to beat inflation…
