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Britons can benefit from tax relief on their pension savings, but only up to a certain point. The presence of the Lifetime Allowance (LTA) looms over those who have saved effectively for retirement.
The LTA was originally introduced in the 2006/07 tax year, and was set at a significantly higher level of £1.5million.
It was then increased over the next few years, rising as follows:
- 2006/2007 – £1,500,000
- 2007/2008 – £1,600,000
- 2008/2009 – £1,650,000
- 2009/2010 – £1,750,000
- 2010/2011 – £1,800,000
- 2011/2012 – £1,800,000
There is another limit on retirement savings known as the Annual Allowance.
As the name suggests, this caps the tax-free pension savings of Britons in a given year.
It currently stands at £40,000.
As with the LTA, anyone who exceeds the Annual Allowance must report this on their tax return.
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