If enacted, the spring 2023 budget will remove Lifetime Allowance Tax (LTA). This has been a very tricky issue to deal with in divorce proceedings where there are significant pensions.
If enacted, the spring 2023 budget will remove Lifetime Allowance Tax (LTA). This has been a very tricky issue to deal with in divorce proceedings where there are significant pensions. On the face of it, this will simplify many future reports, but what about cases about to settle where you already have a PODE report, or cases that have already settled where the settlement took into account future LTA liabilities. This note gives a brief, initial steer. Please note that this commentary is prefaced on the Budget being passed / approved.
Wow – Very few expected the abolition of LTA in yesterday’s budget – least of all me. But, I take some solace that in my Twittersphere of pension geeks (and we are a very interesting community I promise you), most others are waking up this morning saying, “Was that a dream? Did the CX really abolish LTA yesterday?”
Only this week, Financial Remedies Journal Spring 2023 edition, has an article, penned by myself and my colleague at RBC Brewin Dolphin, Peter Turnbull, on the issues regarding LTA and Pension Sharing Orders. That’s aged well hasn’t it? At least “Mr Divorce”, Nigel Shepherd, was kind enough to mention (fess up on) a similar happening for him. Nigel was speaker at a conference the day after returning from holiday, and prior to his departure had prepared all his notes and slides. As he was waiting for his speaking slot, someone just happened to mention that during his holiday, a new case had completely changed the law. To use Nigel’s words, “I was totally stuffed.”
Anyway, enough of this introspection. What does this mean in practice?
However, how long lasting will this abolition of LTA be? The shadow CX has already announced that labour would reverse this move. Afterall, by definition, it only benefits people with pension funds in excess of £1m. If the abolition does get reversed, I cannot see any way in which its reinstatement does not cause the most complex set of pension legacies, since the most inappropriately named piece of legislation of all time, “The Pension Simplification Act, 2006.” And who knows, if it is reversed, my article published this week will be seen to be one of the most prescient articles of all time.