Budget 2015: pensions lifetime allowance reduced to £1m

In line with the major pension reforms and new drawdown rules due to come into effect from April 2015, the Chancellor confirmed that the lifetime allowance will be reduced to £1m next year while annuity exchange for those who have already retired will be introduced from 2016

Only 4% of UK pension pots are worth more than £1m so this measure will have limited impact on the majority of UK taxpayers.

Meantime, he said the annual allowance for pensions, currently £40,000, will not be reduced, despite the lifetime allowance reduction.

'From next year we will further reduce the lifetime allowance to £1m from £1.25m – from 2018 we will index the lifetime allowance,' Osborne said.