Any payments over the LSDBA will be subject to income tax at the individuals’ or beneficiaries’ marginal rate.
The introduction of two novel allowances designed to replace the existing LTA, which will mostly put people in the same tax position as they were before any of the changes, might not necessarily yield a straightforward simplification of the overall pension tax framework.
Indeed, one could make the case that the introduction of two new limits accompanied by unfamiliar acronyms would only serve to create more confusion.
The abolition of the LTA ought to mark a stride towards simplicity, but altering pension tax policy will always pose a challenge due to the inherent complexity of the system.
Joshua Croft is senior technical consultant at AJ Bell
