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The government has corrected errors which had been embedded into legislation when the lifetime allowance was scrapped.
The LTA was abolished in April, but there were mistakes in the original legislation which the government needed to fix before certain clients could make changes to their pension.
In its newsletter in April, HM Revenue & Customs advised some clients to delay taking their pension benefits or transferring until it was able to fix the incorrect legislation.
Regulations to correct this were laid before Parliament in October and were passed into law earlier this month. They will apply retrospectively from April 6, 2024.
Andrew Tully, technical service director at Nucleus, said: “More than seven months after the LTA was abolished, these regulations eventually tie up the legislative loose ends.
“Advisers and clients affected can now take benefits or transfer as they wish without the fear of any detrimental consequences.”
The errors related to any cash which involved:
• Scheme-specific tax-free cash protection (that is people who had the right to take more than 25 per cent tax-free cash as at 5/4/2006);
• A transfer of a case with enhanced protection;
• Enhanced protection and primary protection cases with protected lump sum rights of more than £375,000;
• The payment of a lump sum death benefit from funds which crystallised before 6 April 2024;
• Any transfer from drawdown to a qualifying recognised overseas pension scheme;
• Any transfer to a qualifying recognised overseas pension scheme which involves benefits from before April 2006.
The LTA was scrapped in the 2023 Budget, with former Conservative chancellor Jeremy Hunt insisting it would be done by April 2024 despite warnings about the tight timeframe. This timeframe was reiterated in last year’s Autumn Statement.
The legislation to abolish the LTA was pushed through in quick timescales, and as reported at the time, many industry professionals said there was insufficient time to deliver a change of this magnitude.
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