If Labour does get elected and reinstates the LTA, it may introduce another level of protection for those people who have happily busted the LTA since April 2023. But there is an outside chance it may not.
The end conclusion is this is no basis for planning long-term savings. No doubt some people will make poor decisions due to lack of knowledge and crystallise early in an ill-judged attempt to escape charges.
But if HM Treasury does decide to re-write the pension rules completely then holding off crystallising may be the better decision, especially if in the future members can choose which pension scheme they want to take their tax-free cash from.
This is nothing short of a complete mess. The rules are so much up in the air it can only severely damage people’s confidence in pensions (and politics).
Now is the time for both HMRC and the Labour party to fully engage with our industry to throw some light on their future plans.
Rachel Vahey is head of policy development at AJ Bell
