The pensions lifetime allowance will be frozen at its existing level until April 2026, in a move that effectively decreases its value when inflation is taken into account. The Chancellor last week said the lifetime allowance would remain at its current £1,073,100 for the next five years, rather than increasing in line with inflation. The move will raise around £1 billion between now and the 2025/26 tax year, and if CPI were to rise in line with official OBR forecasts, it would imply that without the policy, the lifetime allowance could increase by around £85,000 by 2025/26.The lifetime allowance is a limit on the amount that can be drawn from pension schemes – whether in lump sums or retirement income – and can be paid without triggering a tax charge. At its most generous the lifetime allowance stood at £1.8 million in 2011/12 but was gradually reduced to £1 million in 2016/17 before creeping back up to its current value. The policy fell flat with those working in the pension sector. Aegon pensions director Steven Cameron said freezing the lifetime allowance was likely to send the wrong signals to savers.

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