The Chancellor has confirmed that the lifetime allowance will be reduced from £1.25m to £1m.
Chancellor says the LTA will be index-linked from 2018.
He rejected calls for a reduction in the annual allowance to fund a reduction in university tuition fees, as proposed by Labour, arguing it would disproportionately impact public sector workers.
He said the reduction in the LTA would raise £600m, but would only impact 4 per cent of those approaching retirement.
Osborne said: “We have looked at calls to reduce the annual allowance as well. That would involve punishing public sector workers. So I agree with many of those on the front bench opposite who believe that goes too far.”
Suffolk Life head of marketing and proposition Greg Kingston says: “Political headlines can easily result in unintended behaviour. Pension savers between 55 and retirement age are one group who might easily be nudged into withdrawing their pension funds completely. They’ve been told already that they can access their pensions in full from April, and now we have a Budget whose pension headline is that the cap on pension savings is now approaching half of what it was just a few years ago. That could drive a proportion of pension savers into making irrational decisions, such as ceasing contributions or withdrawing their pension funds in full.
“Advisers will need to review all their clients whose pension savings could approach the new, lower pension lifetime allowance of £1 million. It’ll be a particularly testing time for those clients who are over 55 and have to also understand the new pension income options and, in particular, the new taxation regime of pension assets on death. It’ll make for a very busy time, particularly if advisers also have to respond to a new set of client queries on whether or not they should cash in their annuities. It is said every year but remains true: the need for advice has never been greater.”