The most significant change affecting pensions in the Spring Budget is the scrapping of the Pension Lifetime Allowance (LTA), which had stood at £1,073,100. The LTA represented the maximum amount you could build up in pension benefits, while also enjoying full tax benefits.

Though the LTA had been expected to increase, its complete removal means there is no longer a cap on the amount of money you can save in your pension pot.

Previously, exceeding the LTA meant paying a hefty tax charge on the excess amount. With the abolishment of the LTA, you can now save as much as you want in your pension pot without worrying about a tax penalty.

Due to the scrapping of the LTA, a cap is now in place on the 25% tax-free lump sum you can take from your pension at age 55 (or age 57 from 2028).

This means the maximum tax-free lump sum you can take is £268,275. In reality, it’s the same limit that was in place before, given that it’s 25% of the old LTA limit of £1,073,100.

Because the LTA has fallen over the past decade, some people have ‘protection’ for an LTA that’s higher than the recently-scrapped limit – and therefore a potentially a higher tax-free lump sum than they would receive under new rules. If you’re in this position, it’s especially important to seek advice before you increase contributions to your pension.

The Spring Budget has also raised the annual allowance for pension savings from £40,000 to £60,000. The annual allowance is the maximum amount you can contribute to your pension each year, and still enjoy full tax benefits.

This increase means that you can now save up to £60,000 every year without incurring a tax charge.

The Money Purchase Annual Allowance (MPAA) has also been increased from £4,000 to £10,000 per annum. The MPAA is the amount of money you can put into your pension pot tax-free after you’ve started to access it.

This change aims to encourage people to save more for retirement (which they might do by returning to the workplace) by allowing them to contribute more money to their pension each year.

The scrapping of the Pension Lifetime Allowance, and the increases to the annual allowance and MPAA, are designed to discourage professionals from retiring early – or encourage them back into the workplace.

Whatever your circumstances, it’s essential to seek professional advice before making any decisions. A conversation with a financial planner will enable you to make informed choices and get maximum benefits from these changes.