UK. Over a million pensions face 55% tax timebomb
The pension pots of around 290,000 UK workers have already surpassed the Lifetime Allowance (LTA), meaning that they could face a hefty tax on any additional retirements savings.
In addition to those already past the point of no return, research by mutual insurer Royal London has revealed that there are around 1.25 million people at risk of breaching the LTA by the time they retire.
This is because senior and well-paid employees with defined benefit or defined contribution pension schemes have either already gone over the current limit, or are set to do so.
Many of those at, or near, the LTA are also continuing to pay into their pensions and unintentionally adding to their own tax burden.
At its peak, the LTA was £1.8m. Severe cuts have seen it fall to £1.03m ($1.36m, €1.2m), but it is set to rise to £1.05m in April 2019.
Savings up to that sum are tax free, but any thing over risks being hit with a charge of 55%.
Need for tax simplification
“Pension taxation is never popular, but this is no longer just about politicians winning over older voters,” Jon Greer, head of retirement policy at Quilter, told International Adviser.
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