Many of our serving members have contacted us concerned over recent media reports such as this article in City AM stating the Chancellor is once again considering cutting the pension tax-free Lump Sum Allowance (LSA) in the forthcoming Budget.
Comments like this are typical:
“My plan…..to ensure my family’s financial security relies on the lump sum payment, as it has been promised for the over 25 years I’ve already served.”
We don’t deny that tough choices lie ahead for the Government in the Autumn Budget. However, key decision makers must understand the purpose of the Armed Forces Pension Scheme is to sustain operationally effective Armed Forces by incentivising service and providing a financial platform for a second career as a demonstration of the nation’s commitment to those who have served their country – as enshrined in the Armed Forces Covenant. Reneging on this promise would be corrosive and undermine confidence in those who serve that the Government will honour its obligations – and all that implies for Armed Forces retention.
Last year the CE wrote to the Chief Secretary to the Treasury on the subject. The Pensions Minister replied saying:
“The Government recognises the invaluable work of both current and veteran servicemen and women across the UK…..wishes to encourage pension saving…..is committed to supporting savers of all incomes and at all stages of life……pension contributions made from income during working life are tax-free….there were no changes to the tax-free pension commencement lump sum in the [2024] Autumn Budget. Thank you for taking the trouble to make me aware of these concerns.”
But that was then, and this is now. We cannot speculate as to the likelihood of a reduction in the pension tax-free LSA , but we have and will continue to highlight the likely impact should the Government choose to do so. Our position remains unchanged, and we will keep peddling this message through to Budget Day and beyond.
Image: HMRC (His Majesty Treasury) sign in London, UK
