2023 Changes to LTA – Lifetime Allowance Updates for Your Retirement Plans
When the Chancellor scrapped the LTA (2023 Lifetime Allowance changes) on UK pension funds, effective from April 2023 onward, many pension savers, international expats and those approaching retirement welcomed the news, with the knowledge that pension assets worth over the previous threshold would not now be exposed to heavy tax obligations.
However, the impacts are complex and many, where pension tax reforms have immediately altered the risk, opportunities and decision-making associated with thousands of retirement portfolios.
The most notable impact will be on those with pension funds valued at £800,000 or above and expats who may now need to completely reassess how they intend to transfer, retain or reinvest funds as a tax planning measure.
How the Removal of the LTA Affects Expat Pension Transfers
Expats typically opt for one of several ways to manage their pension wealth, depending on their objectives, wider investment strategy, tax position, and status as tax residents in both their home country and new place of residence overseas.
In summary, the options include the following:
- Transferring British pension funds to an overseas scheme included on the HMRC Recognised Overseas Pension Scheme approved list.
- Keeping pension funds as they are and receiving benefits or transferring funds into an overseas bank account.
- Transferring their pension assets to a private scheme, such as a Self-Invested Personal Pension.
- Extracting pension finances and reinvesting into an alternative product or structure.
Each possible solution carries risks and rewards based on overseas transfer charges, income and inheritance tax, access to pension freedoms, maximum lump sum withdrawals, and the flexibility to choose investment assets, classes and sectors.
The Lifetime Allowance changes, removing the LTA, adds another layer to this decision-making, where it may now be advantageous to transfer funds, accepting any applicable transactional and tax liabilities in return for a – potentially temporary – release from the previous obligation to pay up to 55% tax on funds valued above £1.073 million.
As always, the most suitable options require a full review of your retirement plans, pension products and the pros and cons to ensure you make sound financial decisions.
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Lifetime Allowance Changes (LTA) advice.
If you’re thinking about how the 2023 Lifetime Allowance changes may affect your retirement plan, then an initial conversation with Malcolm McDowell is a positive place to start.
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