What is the pensions lifetime allowance and should you be worried about hitting it?

In his recent Budget the chancellor froze the pensions lifetime allowance at £1,073,100. That may sound like a lot to have in your pot, but you could easily find yourself hitting it. Saloni Sardana explains what it is, and what the freeze means for you.

Rishi Sunak
Rishi Sunak: a balancing act
(Image credit: © Wiktor Szymanowicz/Barcroft Media via Getty Images)

Chancellor Rishi Sunak’s second Budget trod a fine line between helping the UK recover from the coronavirus pandemic right now, but also laying out a plan to pay back the eye-watering £355bn the government is forecast to borrow in 2020-2021.

One of the biggest money spinners was the announcement of freezing all personal tax allowances until at least April 2026. This is a classic example of “fiscal drag” (explained here in our two minute video), where tax bands do not change but the tax take increases because rising incomes push taxpayers into higher brackets.

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Saloni Sardana

Saloni is a web writer for MoneyWeek focusing on personal finance and global financial markets. Her work has appeared in FTAdviser (part of the Financial Times),  Business Insider and City A.M, among other publications. She holds a masters in international journalism from City, University of London.

Follow her on Twitter at @sardana_saloni