This year’s first Finance Bill, containing the abolition of the pensions Lifetime Allowance and its replacement by two new lump sum allowances, is to receive Royal Assent today, having completed all its Parliamentary stages yesterday.

David Everett, partner at LCP, commented: “Although the sting of the Lifetime Allowance charge for those with high pensions wealth has already been removed from 6 April 2023, this latest Finance Bill aims to complete the job by removing all references to the Lifetime Allowance from the fiendishly complex and extensive pensions tax law. However, this has been a rushed job with errors and omissions coming to light, resulting in HMRC having to now engage in a patch and mend job through regulations that are promised and will hopefully be delivered in the limited time before the new regime comes into operation on 6 April 2024.

“The focus now turns to pensions administrators who have next to no time to adjust their systems, processes and member communications so that for those benefits taken from 6 April 2024, compliance is by reference to the new law that is focussed on lump sum checks. 

“And for a narrow group of pension savers that have started to take benefits but have more to come, they will need to decide before taking any more benefits whether they should apply for a special certificate that reflects the lump sums they have actually taken or rely on HMRC’s broad brush approach to estimating them.

“With all the detailed technical changes being made, given that the Lifetime Allowance was one of the cornerstones of the pensions tax regime that has operated for 18 years, it will be quite some time before this new regime has been assimilated by the pensions industry. The worry is that despite the significant burden of introducing this new regime it may yet prove to be short lived, as a change of Government could well see some kind of reinstatement of the Lifetime Allowance.”