10 changes you need to know about.
For pension savers, one of the key take outs from the March 2023 Budget was Jeremy Hunt’s announcement that he was scrapping the pension lifetime allowance charge and increasing the pension annual allowance to £60,000.
However, he didn’t discuss what this means in real terms, how it could impact your retirement savings and income, and why now more than ever you should review your pension.
You could be affected if you:
- Have a pension fund that is valued at close to £1.0731 million (the lifetime allowance figure) or more. If you have a significant pension fund, the removal of the lifetime allowance charge allows you to pay more into your plan and not pay certain tax charges when drawing on it
- Want to pay more into your pension. Most taxpayers can now pay up to £60,000 a year into a pension (if their earnings allow)
- Previously applied for lifetime allowance protection. This could give you a valuable enhanced pension tax-free cash entitlement, so reviewing any past lifetime allowance protections could give you more flexibility when retiring or restarting pension contributions
- Want to benefit from employer pension contributions. You may have opted out of a workplace pension scheme if you were close to breaching the lifetime allowance. Now, it could be beneficial to start paying into a plan again and take advantage of any employer contributions
- Have older pensions without flexible death benefit options. These could be treated differently under the new rules. Older plans may not have ‘modern’ features, such as being able to flexibly access benefits, meaning that potentially, when you die, the funds will be unnecessarily taxed and your beneficiaries may receive less than you hoped
- Are retiring within the next few years. You might be able to bring the date forward. The amount you will now receive after age 55 could be considerably more than previously anticipated, depending on your circumstances
- Are due to inherit a pension soon. Pension changes will be finalised after the Finance Bill is passed. If you defer payment of pension death benefits you could pay less tax
- Have drawn on your pension but returned to work. The increase of the money purchase annual allowance from £4,000 to £10,000 could mean you can re-enrol in a workplace pension and benefit from employer contributions again. When you fully retire, this could increase the value of your pension savings
- Have death benefits written into trust. Pensions that have designated a trust to receive benefits on your death might result in unnecessary tax being suffered if you were to pass away during the 2023/24 tax year
- Are above the threshold for the new free childcare for two-year-olds. Making pension contributions could lower your income within the annual earnings limit (£100,000)
Book a pension review
There is no better time to review your pensions with an expert from Evelyn Partners. Even if you have had a review within the last 12 months, the advice you will receive could be very different. In fact, there are some cases where the right advice could result in a complete U-turn from what you would have received just a few months ago.
To find out more about how you could be affected by the pension rule changes, book an initial, no-obligation consultation online.
The content of this article is not advice or a recommendation and you should not make any investment decision based on it.
Prevailing tax rates and reliefs depend on your individual circumstances and may be subject to change in the future.
The value of an investment may go down as well as up and you may get back less than you originally invested.
Evelyn Partners Financial Planning Limited is authorised and regulated by the Financial Conduct Authority.