Pension warning as Rishi Sunak may limit tax-free savings sum – ‘simplest lever to pull!’

Pensions are at 'highest level in three decades' says Sunak

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The Chancellor’s statement is due next week, and experts think Mr Sunak will try to rake back money. One way in which this could be done is targeting current rules surrounding pensions.

Pension saving is often considered to be key for retirement, however, there are regulations in place with this form of forward-planning.

One key aspect of this is the annual allowance – with the rule relating to how much a person can save in a tax year.

While there are no pension saving limits so to speak, this is the limit before a person will have to pay tax – something many will wish to avoid.

At present, the pension annual allowance is £40,000 for the tax year.

However, experts have speculated this could be on the chopping block next week.

Laura Suter, head of personal finance at AJ Bell, said: “If the Treasury is looking to save money on pension tax relief, the annual allowance is the simplest lever to pull. 

“The annual allowance is currently set at £40,000, while savers can also ‘carry forward’ up to three years of unused allowances. 

“Lowering this to £30,000 or even £20,000 – in line with the ISA allowance – would raise revenue for the Exchequer while only affecting those who make very large pension contributions.”

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Ms Suter also analysed another allowance known as the Pension Lifetime Allowance (LTA).

It limits how much a person can build up in pension benefits across their lifetime while still enjoying full tax benefits.

Currently, this stands at £1,073,100 – and will be so until 2025/26, as the Chancellor has frozen the allowance.

This could rake in more money for the Treasury as people get propelled over the limit.

This could rake in more money for the Treasury as people get propelled over the limit.

However, due to the existing LTA freeze, the expert said this kind of move is less likely.

The Spring Statement will occur next week, but it is not the full-blown Budget many may have expected.

Instead, Mr Sunak will provide an economic update, particularly important as the UK emerges from the pandemic.

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Regardless, many experts expect the Chancellor to make at least some announcements next week.

This is because of the cost of living crisis, rising inflation and other financial pressures facing Britons at the moment. 

Ms Suter added: “It seems impossible that Chancellor Rishi Sunak will ignore all that and not offer any help to the UK public.”

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