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Inflation boosts lifetime allowance

Retirees stand to benefit from a £20,000 boost to the lifetime allowance in 2020/21, according to official figures.

The Office for National Statistics revealed that the rate of inflation, determined by the Consumer Prices Index (CPI), remained at 1.7% in September 2019.

The lifetime allowance increases on 6 April in line with the CPI's rate of inflation from the previous September.

Subject to confirmation and rounding to the nearest £5,000, the lifetime allowance should climb from £1.055 million in 2019/20 to £1.075m for 2020/21.

Last month's inflation figure is also used to uprate several state benefits, including the state pension which is line for a 4% increase next April.

However, the CPI's rate of inflation is not used to uprate the under-fire annual pensions allowance.

Helen Morrissey, pension specialist at Royal London, said:

"This 1.7% CPI figure sees the lifetime allowance boosted to approximately £1.073m but the annual allowance remains frozen at £40,000.

"This exposes the real lack of joined-up thinking when it comes to this ridiculously complex web of tax allowances and highlights the need for urgent reform."

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