The news came today in just two brief sentences, halfway through his 2004 Budget speech, and immediately after the annual tax increase on cigarettes. Chancellor Gordon Brown announced as expected, replacement of the existing eight pensions tax regimes by a single regime based on a Lifetime Allowance (LTA). However, he also said:

• A-Day will be put back to 6 April 2006;
• the starting level of the LTA will be £1.5 million;
• for the years 2007/08 to 2009/10 the LTA will be set now; and
• for the year commencing 6 April 2010 the LTA will be £1.8 million (ie regardless of price inflation in the interim).

Mr Brown attributed a cost to all this (to the Treasury, not to pensions providers) of £165 million by 2008/09; elsewhere, in Chapter A of the accompanying Financial Statement and Budget Report, the cost is estimated at around £250 million by 2009/10. The Chancellor gave no more information about the new regime.

However, Inland Revenue Budget Note BN39 has filled in some key details.

1. The LTA will rise to

• £1.6 m for 2007/8
• £1.65 m for 2008/09
• £1.75 m for 2009/10 and, as the Chancellor said, to
• £1.8 m for 2010/11.

The LTA will be reviewed every five years.

2. The Annual Allowance will start at £215,000 and "increase steadily each year such that in 2010 it will be at £255,000"*. Like the LTA, it will be reviewed every five years.

* the actual figures are published elsewhere (as a footnote on page 111 of the Economic and Fiscal Strategy Report (Ch 5)):

£225,000 for 2007/08
£235,000 for 2008/09
£245,000 for 2009/10
£255,000 for 2010/11

A Treasury Press Notice has confirmed that the earnings cap will rise, in line with statute, to £102,000 for the 2004/05 tax year. This figure has already been incorporated into the current version of the Aries Pensions System (v8.8).