Budget 2018: Lifetime allowance nudges up as Hammond bucks pension tax reform rumours

By Michael Klimes

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Oct 31, 2018

The lifetime allowance for pension savings will increase slightly more than expected next year to £1,055,000, according to Budget documents published today.

Initially the lifetime allowance was meant to increase in line with September’s figures for the Consumer Price Index to £1,054,800.

But the government has rounded up the lifetime allowance slightly more than originally expected.

In an otherwise quiet Budget for pensions chancellor Philip Hammond made no radical changes and kept the annual allowance unchanged at £40,000.

Earlier in the month The Telegraph reported a senior Treasury source confirmed tax free contributions would be stripped back to unlock the extra cash for healthcare.

In June the government promised to spend an extra £20bn annually on the NHS by 2023 and, in July, reports surfaced the government was considering how this could be done.

It is understood the Treasury started to investigate the flat-rate proposal, with some estimating a single rate could raise an additional £4bn in revenues.

Tax relief is currently assigned in line with a person’s marginal rate of income tax, which distributes relief towards higher earners and costs the government around £40bn a year.

A flat rate of 28 per cent has been proposed by the Resolution Foundation to help millennials save for later life and the Royal Society of Arts has suggested a 30 per cent rate to help the self-employed.

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