Jeremy Hunt recently unveiled new plans to abolish the lifetime allowance for pension savings to address concerns that set allowances are driving doctors and other professionals into retirement.
This news is huge for UK expats with a UK pension as the new allowance could help people to avoid paying more tax on their pension pots when they withdraw.
Why are these changes happening?
The changes will benefit millions of people with a UK pension. The main reason driving this change is that there is concern that valuable professionals such as doctors are leaving the workforce early due to the current pension allowances pushing them into high tax brackets therefore forcing them into earlier retirement.
What is the lifetime allowance and how much will it be boosted?
The lifetime allowance represents the amount people can build up in their pensions before incurring punitive charges, which is why expats will be pleased to hear that Jeremy Hunt will abolish the allowance on tax-free pension savings from its current level at £1.07 million. The policy will help an estimated 1.2 million people avoid paying extra tax when drawing on their pension pot.
Annual allowance changes
As well as the lifetime allowance, the government will raise the annual contribution allowance – the amount people can save yearly before incurring tax – from £40k to £60k. The combined cost to the treasury is expected to be around £2 billion a year.
Ready to find out more?
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