Britons hit with 55% pension tax as allowance ‘more than halved’

In his past life as Chancellor, the new Prime Minister Rishi Sunak announced he would be freezing a range of allowances until the 2025/26 tax year. One of these was the Pension Lifetime Allowance, which limits the amount a person can save into their pension across their lifetime while still benefiting from tax relief.If the Lifetime Allowance is exceeded, then Britons are likely to be subject to a 55 percent tax, which many will hope to avoid.At present, the Lifetime Allowance stands at £1,073,100, which does appear to be a high amount.However, the freeze alongside rising inflation has had a severe impact on pension savers.Interactive investor highlighted inflation since 2006, when the cap was first introduced, means £1,500,000 – the original cap – would now be worth £2,322,583 in today’s money.READ MORE: UK state pension lags behind other nations in payouts Pension warning: Britons hit with 55% tax as allowance ‘more than halved’ in real terms (Image: Getty)It means the Lifetime Allowance has more than halved in real terms for pension savers.Alice Guy, personal finance expert, at interactive investor, said: ‘Freezing the Lifetime Allowance at £1,073,100 would make it more difficult for pension savers to achieve a comfortable retirement. ‘Inflation since 2006, when the cap was introduced, means that £1,500,000 (the lifetime allowance in 2006) would now be worth £2,322,583 in today’s money.’A private pension pot of £1,073,100 would give someone a pension income of around £32,193 per year if they withdraw three percent per year from their pension. DON’T MISSCouples face 40% inheritance tax hit due to ‘common myth’ [INSIGHT]Rishi Sunak faces ‘huge risk’ on state pension triple lock [LATEST]Millions of Britons could be eligible for savings boost worth £1,200 [EXPLAINED] Pension: Monthly sum needed for a £100k pot (Image: EXPRESS)To avoid being hit with tax, it is important for savers to monitor the value of their pensions.The increase in value of defined benefit pensions in particular may be surprisingly large, the Government-backed service MoneyHelper has warned.The service added: ‘You might also want to consider applying for protection if your pension savings are expected to exceed the lifetime allowance threshold.’There were and are protections that can help you avoid a tax charge by giving you a higher lifetime allowance.’You can check if you already have protection but you will need an account for HMRC online services. If you don’t have an account, you can create one.’