LTA confusion tops technical questions from Royal London

Royal London, the UK’s largest life, pensions and investment mutual, has found confusion over the lifetime allowance (LTA) generates the most questions from advisers.

Royal London’s technical team is one of the busiest in the industry, delivering over 70 training sessions to adviser firms either face-to-face or via webinar this year so far. Since the Spring Budget and draft legislation announcing abolition of the LTA earlier this year, the five most asked questions to the technical team are:

• Will the lifetime allowance (LTA) return if Labour come into government?
• Is there any point paying into a pension if a client is over the lifetime allowance?
• What is the impact of taking lump sums above the LTA in the 23/24 tax year?
• How will Pension Commencement Lump Sum (PCLS) or the tax-free element of an Uncrystallised Funds Pension Lump Sum (UFPLS) be tracked?
• What is happening with death benefits, particularly in relation to beneficiary drawdown for those under 75?

Clare Moffat, pensions expert at Royal London, said “Our conversations have highlighted that, by far, advisers and their clients are more concerned about the uncertainty surrounding the lifetime allowance changes earlier this year than any other matter. Although we have some draft legislation, we are still waiting on more in relation to key areas of the removal of lifetime allowance. It’s difficult for advisers to advise clients when the full information isn’t available.

“With the upcoming Autumn Statement, more advisers are getting in touch as there is concern there will be more changes ahead. Clients who were previously restricted by the annual allowance may be thinking about paying an extra £20,000 a year into their pension, but uncertainty around the rules is seeing this being delayed. Advisers are seeking clarity, and this is needed quickly to enable effective planning for clients.

“Pensions freedoms had a huge effect on choices at retirement. However, the changes to lifetime allowance will have an equal, if not greater, impact on the way pensions work.”