Kay Ingram: Sunak's LTA freeze creates 'bizarre disincentive'

Spring Budget announcement

clock • 4 min read

Chancellor Rishi Sunak sent a confusing message to pension savers when he froze the LTA in the Budget. If investment success could be rewarded with a tax bill it creates a bizarre disincentive, writes Kay Ingram

Pre-Budget rumours that tax relief on pension savings would be reduced to a standard rate, rather than the more generous marginal income tax rate of 40p or 45p in the pound did not surface in Sunak's second Budget instead, he chose to freeze the lifetime allowance (LTA) until 2026. The LTA is the total value which an individual can take from all their private pensions with the benefit of tax -free growth. Once the allowance is used up a lifetime allowance charge is levied at 25% if the excess is drawn as income (also subject to income tax) and at 55% if drawn as a lump sum. Freez...

To continue reading this article...

Join Professional Adviser for free

  • Unlimited access to real-time news, industry insights and market intelligence
  • Stay ahead of the curve with spotlights on emerging trends and technologies
  • Receive breaking news stories straight to your inbox in the daily newsletters
  • Make smart business decisions with the latest developments in regulation, investing retirement and protection
  • Members-only access to the editor’s weekly Friday commentary
  • Be the first to hear about our events and awards programmes

Join

 

Already a Professional Adviser member?

Login

More on Pensions

Evolution of pension recommendations and how 2026 may influence change

Evolution of pension recommendations and how 2026 may influence change

Next year could be the start of something big

Richard Hulbert
clock 06 January 2026 • 4 min read
Preparing for 2029: Adapting to the Budget's salary sacrifice cap

Preparing for 2029: Adapting to the Budget's salary sacrifice cap

'While this policy alters the landscape, it arguably represents an adjustment rather than a fundamental reform'

Steve Charlton
clock 22 December 2025 • 3 min read
Utmost to sell life and pensions business to JAB Insurance

Utmost to sell life and pensions business to JAB Insurance

To focus on wealth solutions business

Jen Frost
clock 22 December 2025 • 2 min read