Next up, a question about early retirement.
Jamie says: “At 52 with a pension pot of £1.1m and no longer working (i.e. living off savings until I turn 55), and therefore not contributing, is there anything I can do to avoid any of the possible scenarios mentioned in your last Q&A session? I am afraid not, but I would appreciate any tips.”
Mike responds: “Our new chancellor announced that she has cancelled her plans to re-introduce the lifetime allowance charge, having discovered how difficult it would be to do so. That does not necessarily mean that the position could not change in the future. There is the risk that the lifetime allowance cap used for tax-free lump sums could be reduced. Strictly this was replaced in April by the £268,275 lump sum allowance and the £1,073,100 lump sum and death benefit allowance, although they have a similar effect.
“There is also a risk the tax relief on pension contributions could be restricted. It may sound negative, but for your position and age, I think you are probably best sitting it out until we have a better idea of what the chancellor is intending to do, probably in her planned Autumn statement. There is a risk that actions taken now could be counterproductive.”