It’s risky for clients to bank on lifetime allowance removal remaining, IFAs say

Financial advisers support the pension related changes announced in the March Budget but think it’s risky for clients to plan on certain measures remaining in place in the long-term, new research from Standard Life finds.

The research, conducted among 203 IFAs, shows widespread support for the pension changes. 91% are in favour of the increase of the money purchase annual allowance from £4,000 to £10,000, with 69% strongly supporting.

86% approve of the increase of the annual pensions allowance from £40,000 to £60,000, with 59% strongly supporting.

Over three quarters (76%) support the removal of the pensions lifetime allowance (LTA), with 52% strongly supporting, while 74% support the changes to the tapered annual allowance, 52% strongly.

However, with the Labour Party signalling it plans to reverse the removal of the pensions LTA if they come to power at the next General Election, over two thirds (69%) of IFAs believe it would be risky for clients to plan on this measure being in place long-term. This increases to 75% among those who have an average client portfolio of £200,000+. Overall, only 9% think it would be safe for clients to plan on it being in place in future.

Chris Hudson, retail advised managing director at Standard Life, commented: “The pension changes announced in this year’s Budget have proven to be popular among financial advisers, however there is clearly less confidence about their long-term future.

"The removal of the LTA has become a political hot potato with Labour signalling it will reverse the decision if it comes to power. As a result, not only are advisers having to get their heads around the implications of the LTA removal for their clients, but they are also second guessing whether it’s worth making financial plans now for something that may change in near future.

"The uncertainty around future policy could lead to advisers and clients making poor decisions, and this is incredibly concerning especially with the advent of consumer duty.”