The new government’s bid to make the rules around saving for retirement less complicated is not only welcome news, it has opened new opportunities for investors and those in the financial sector. 

This is the era of the “Great Wealth Transfer”, with trillions set to be passed into new hands. So let’s look at why pensions are so much more than just retirement planning. 

Why pensions are so great

While money in a pension doesn’t attract inheritance tax after death – unlike an ISA, which could be taxed at up to 40% – this was previously limited by the lifetime allowance.

Following the removal of the lifetime allowance, the tax break on pensions is becoming even more important than before. There is no more limit to how much you can put into your pension in your lifetime. However, you’ll still need to make sure to stay under the annual limits, that are dependent on your income and tax bracket, but is at £60,000 for individuals in the standard income tax bracket.

This means that pension savings, when thought about in the most basic terms as a pot of money, can be a source of income for multiple generations’ lifetimes, and not just for one person’s retirement.

For those at or near retirement, wealth transfer will be a more immediate consideration. And tax optimisation, preservation of pension capital, and intergenerational planning will be the priority.

For those of us a little further away from retirement, this is a chance to look at the simple, but fundamentals of retirement income planning as well as what the pension of the future may well look like as well as the lifelong efficiency of growing and storing money in a pension. 

Looking to the future

Of course, governments change and policies change, so none of us can say for sure if the removal of the lifetime allowance is a finality. The government is currently considering plans to apply income tax to untouched pension pots that are passed on under certain circumstances. However, we can hope any future government will want to continue with the simplification of savings policy in the UK for the good of society.

A versatile financial planning tool

A pension pot has always been a versatile financial planning tool. But with the removal of the lifetime allowance, it should be seen as much more than just a retirement plan, post-work. From one important pension policy change, there are a lot of important factors to consider, and crucially the importance and unique benefits of the pension. What are you waiting for?! 

Propelle does not provide financial or pension advice, this content is for educational purposes only.