Republished with the kind permission of SIPPs Professional, technical expert James Jones-Tinsley shares his thoughts on the Government's lack of preparation around the Lifetime Allowance abolition, and the impact it's having on SIPP professionals.
After the initial ‘bombshell’ in last year’s Spring Budget, when the Chancellor announced the abolition of the Lifetime Allowance (LTA), SIPP Providers and Advisers have faced lengthy periods of uncertainty, as we waited for the primary legislation to catch-up with what had been announced earlier by the government.
Firstly, we had to wait until early July 2023 for the removal of the LTA excess tax charge - with effect from 6 April 2023 - to reach the statute books, via Royal Assent of the Finance (No.2) Act 2023.
In the meantime, SIPP Members were keen to ascertain what crystallisation options the proposed legislative changes offered, whilst SIPP Providers and Advisers were frustratingly having to caveat their conversations with the fact that, until a bill becomes an act, its contents are liable to change.
Secondly, 2023’s Autumn Statement confirmed that the LTA would be abolished with effect from 6 April 2024, and this was followed by the introduction to Parliament of the Finance Bill 2023-24 in late November.
Nearly 100 pages of this Bill are devoted to abolishing the LTA, outlining the allowances that will replace it, and attempting to clarify the transitional provisions that will apply to all those SIPP members with part-crystallised pensions on 5 April 2024.
Frustrations for SIPP Providers and Advisers
A Finance Bill has numerous stages to go through on its journey to becoming an Act, and for that reason alone, it should have been introduced to Parliament long before 27 November.
No sooner had it received its second reading, Parliament went into recess for Christmas and New Year and, as I write, the Commons Committee stage has only just begun; a crucial stage in the process, as this is where amendments to the draft legislation are typically presented.
In the meantime, amid another period of uncertainty, and with one eye on the calendar, the top priority for SIPP Providers and Advisers is amending their client-facing documents, forms and processes, whilst being only too aware that the changes are based on draft legislation, that could be amended at any point before Royal Assent.
It constitutes nothing less than a frustrating and highly unsatisfactory situation, and I do wish our government would get its priorities right, where pensions are concerned.
Priority must be given by politicians to converting the Finance Bill into an Act, because time is rapidly running out and, to mis-quote a lyric from a song by the wonderful Robert Wyatt, “the winds of change are blowing across the [pensions] continent.”
If you would like any further information, please email firstname.lastname@example.org.
Self-investment pensions hub
We're committed to keeping you up to date on the latest self-invested pensions news and commentary. Access a selection of content that may help you with difficult pension choices.Find out more
Stay up to date
Get the latest independent commentary and exclusive insights from a range of experts at the forefront of pensions, investment, insurance and risk – tailored to your preference.Subscribe today