Financial advisers fear that the scrapping of the lifetime allowance (LTA) in the spring Budget may be a short-lived policy decision, according to a survey by AJ Bell.
The survey revealed that the majority of advisers (72%) expect a future government to reintroduce the LTA in some form. A further 19% said they thought it was a possibility, 5% don’t believe a future government is likely to bring it back and 4% were unsure.
More than half of advisers surveyed said they expected at least some clients to crystallise their pension before the next general election, in an effort to mitigate any change in legislation that could land them with a tax charge.
Advisers were also asked if they expected the cap on the maximum pension-commencement lump sum, also introduced in the Budget, would remain.
More than half (55%) said they expected it to remain unchanged, 19% said they expect it to be cut, 11% took the view that it could increase in future and 15% said they were unsure.
‘Bubble of uncertainty’
Rachel Vahey, AJ Bell head of policy development, said: “The Budget changes have – in a single stroke − removed much of the complexity in pensions. It should now be easier for clients to understand their pension-saving choices.
“But this positive development risks being shattered by the political uncertainty surrounding the removal of the lifetime allowance. Advisers and their clients have been put in the unenviable situation of being ‘piggy in the middle’ of a political pensions spat.
“The risk is that a desire to outwit future changes drives clients’ choices on when to crystallise funds, rather than a balanced decision based on the current situation and what is best for them and their families.
“It’s unfair to thrust advisers and clients into this bubble of uncertainty. I hope that all political parties open up communication with the industry, so collectively we can reach a position all support, and, importantly, advisers and their clients can trust won’t change overnight.”
