The amount you can save into a pension over your lifetime while still qualifying for valuable tax breaks is to rise for the first time since April 2010, the Government has confirmed.
In April 2018 the "lifetime allowance" on pension contributions will increase by £30,000, from £1m to £1.03m.
Pensions are "tested" against the lifetime allowance at various points, including when a first withdrawal is made and at age 75, and savers face tax charges on any excess. The charges wipe out the tax relief that applies to all pension contributions.
Despite the increase announced in the Budget there has still been a 43pc cut in the lifetime allowance over the past seven years – in the 2010-11 tax year, you could save £1.8m into a pension.
Telegraph Money has campaigned for the removal of the lifetime limit, arguing that it penalises investment growth and discourages saving. In addition, there is already an annual allowance on pension contributions, set at £40,000 for most people. This has not been altered in the Budget.
It is the first time the lifetime allowance has been increased in line with inflation (using the consumer prices index).
Other allowances have also been increased in line with inflation. The amount you can save into a Junior Isa or child trust fund each year will also rise in line with prices from April 2018, to £4,260 from £4,128.
Some other allowances are fixed in relationship to each other. The "marriage allowance", for instance, is fixed at 10pc of the personal allowance (the amount you can earn tax free). The break allows a couple where one is a non-taxpayer and the other a basic-rate taxpayer to transfer 10pc of their personal allowance each tax year.
Philip Hammond announced that the personal allowance would rise to £11,850 in 2018-19, meaning qualifying married couples can transfer £1,185 to the higher earner to cut their tax bill.