The lifetime allowance cut announced in today's Budget has been slammed as "a cap on aspiration," and as "a catalyst for people to move their British pensions out of the UK."

The comments by the boss of one of the world's largest independent financial advisory organisations follow Chancellor George Osborne's announcement of a further reduction to the lifetime allowance for pension tax relief in the 2015 Budget.

The amount individuals can save tax-free into pensions will be £1m, down from £1.25m, in order to pay for tax giveaways.

 

The founder and chief executive of deVere Group, Nigel Green, says:

"Another reduction in the lifetime allowance is scandalously counter-productive.

"This pre-election gimmick is a disincentive to save as much as possible for retirement– and therefore it could be harmful to Britain's long-term economic success.

GBP pile of coins"With the burgeoning pensions crisis and the looming care crisis, amongst many other factors, we need to urgently revitalise, promote and nurture a savings culture in the UK as a matter of priority.  Continually cutting the LTA goes against this concept.

"This move is a slap in the face for those who have worked hard and saved hard, prudently putting money aside all their lives, in order to be able to enjoy their desired retirement.  It is a nothing short of a dangerous cap on aspiration."

Since being introduced in 2006, the limit has been reduced several times, from £1.5m in April last year following a reduction from £1.8m in 2011.

Mr Green observes: "It could be reasonably argued that the systematic reductions to the lifetime allowance are precursors to a fully-fledged wealth tax – as that is what these limitations essentially represent."

The deVere CEO also predicts an uptick in the trend for pension transfers.

He explains: "I fully expect that as the LTA changes bite, an increasing number of pension savers will look for alternatives.

"The ongoing cuts in the lifetime allowance will, I believe, serve as a catalyst for people to move their British pensions out of the UK and into an HMRC-recognised QROPS, an overseas pension in a secure, low-tax jurisdiction.

"When a UK pension is transferred into a QROPS, it is tested against the LTA at that time of transference.

"When the pension pot is outside the UK, it will be exempt from the LTA limit – even if the pension pot increases beyond £1m over time.  This is significant as the LTA could be cut further in the future.

"Similarly, those who transfer their pensions into a QROPS will typically benefit from being able to access flexible high-return investments and have their pensions paid in the currency of their choice, amongst other advantages."

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