The pensions lifetime allowance (LTA) has fallen from £1.8 million to its current level of £1 million and more and more pension and investment experts are calling for it to be scrapped. People who breach the £1 million limit over a lifetime face penalties of up to 55% when they receive their pension. One of the biggest critics is Baroness Ros Altmann, the former pensions minister who said back in 2016:
"The lifetime limit in a DC pensions world makes it very difficult to actively plan for a long-term pension if you have a reasonable amount of money, because it penalises good investment performance and makes it very difficult to know in advance how much you should put in your pension funds."
However, Baroness Altmann's replacement Richard Harrington has come out in defence of the lifetime allowance in a recent interview with New Model Advisor, saying that it allows people to save four times what they need to reach an average retirement income.
"At the end of the day, the Treasury has got its own pressures. But what I would say is although the pot is only '1 million, that doesn't mean you can only save £1 million, it just means that taxpayers won't help you beyond that and governments have to make that kind of choice with everything."
"At the moment if I just look at the numbers at the base end – the state pension is [just over] £8,000 per year and the average amount people need to retire on, based on 65% of the average salary, is £18,000. That means they have to find another £10,000 per year, so a pot for argument's sake of £250,000. The government is basically saying you need £250,000 to retire to get your income to the average, and we are prepared to allow you four times that [with the LTA]."