Pensions and investments

Lifetime allowance for pensions

The government has announced that it will maintain the Lifetime Allowance at its current level of £1,073,100 until April 2026.

Freezing the lifetime allowance for five years effectively brings more people into the pensions tax net over time, as the effect of inflation to pension savings is not offset with an increase in the lifetime allowance as it was in recent years. It is also likely to impact many of those in the NHS workforce who have been supporting the country throughout the COVID-19 pandemic, as the numbers of those in the medical profession caught by the allowance will effectively be extended.

Consultation on charge cap for pension schemes

The government has announced it will consult on whether certain costs included within the charge cap affect schemes' ability to invest in a wider range of assets. The Department for Work and Pensions will also consider draft regulations to make it easier for schemes to take up opportunities within the charge cap by smoothing certain performance fees over a multi-year period.

The potential reform of these rules may broaden the types of investments that pension schemes can invest in, in particular to include more illiquid assets. While this is under consultation, and there are regulatory hurdles to overcome, it is a welcome move as pension savings can potentially be directed to other areas of the economy which may have been hit by the COVID-19 pandemic.

ISAs

The ISA annual subscription limit for 2021/22 will remain unchanged at £20,000. The annual subscription limit for Junior ISAs and Child Trust Funds for 2021/22 will also remain unchanged at £9,000.