HM Treasury: Stop tinkering, pensions’ tax-free cash already has a cap!

NOTE: This post is more than 12 months old, and the information contained within may no longer be accurate.

A quick Google search will highlight the number of times capping of pension’s tax-free cash has been floated. What is often forgotten is that a pension’s tax-free cash cap was introduced in April 2006 and is actually lower than it has ever been.

Final Salary schemes, which are generally generous in other regards, have been exposed to a tax-free sum cap since 1987; Personal Pensions which account for most savings outside the public sector had no tax-free lump sum cap prior to April 2006 (though contributions were restricted), and a cap of 25% of the standard lifetime allowance came in on 6th April 2006.

The graphic below (followed by a table) shows how the tax-free sum has fallen from the unlimited value to its lowest point from 6th April 2014. Given there have been, by my reckoning, seven changes in six years, maybe we could just leave pensions alone for this autumn statement and budget?

Maximum tax-free sum available since 6/4/06 for those without protections
Maximum tax-free sum available since 6/4/06 for those without protections – click to view full size
Tax Year Personal Pension Occupational Pension
1989/1990 No limit 90,000
1990/1991 No limit 97,200
1991/1992 No limit 107,100
1992/1993 No limit 112,500
1993/1994 No limit 112,500
1994/1995 No limit 115,200
1995/1996 No limit 117,900
1996/1997 No limit 123,300
1997/1998 No limit 126,000
1998/1999 No limit 131,400
1999/2000 No limit 135,900
2000/2001 No limit 137,700
2001/2002 No limit 143,100
2002/2003 No limit 145,800
2003/2004 No limit 148,500
2004/2005 No limit 153,000
2005/2006 No limit 158,400
2006/2007 375,000 375,000
2007/2008 400,000 400,000
2008/2009 412,500 412,500
2009/2010 437,500 437,500
2010/2011 450,000 450,000
2011/2012 450,000 450,000
2012/2013 375,000 375,000
2013/2014 312,500 312,500

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27 Jul 2021

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