10 Major Pension Rule Changes

Chancellor Jeremy Hunt is scrapping the Pension Lifetime Allowance charge and increasing the Pension Annual Allowance to £60,000. What the Chancellor did not discuss in the March 2023 Budget, is what this means in real terms. In addition, how it could impact your retirement savings and income, and why now more than ever it is vital to speak to a Financial Adviser regarding your pension.

This could affect you if you:

Have a pension fund which exceeds or is close to £1,073,100 (the lifetime allowance figure).

The removal of the lifetime allowance charge, means that if you have a sizeable pension fund, you can pay more into your fund without having to pay punitive tax charges when drawing money out.

Want to pay more into your pension.

Since the new rules, most taxpayers can now pay up to £60,000 a year into their pension. Previously, the amount was capped at £40,000. This includes contributions made by your employer and receiving any tax relief from the government.

Previously applied for lifetime allowance protection.

Reviewing any of your past lifetime allowance protections could provide you with more flexibility when making further contributions or retiring. This could have a huge impact on your pension tax-free cash.

Want to benefit from employer pension contributions.

You may have previously opted out of a workplace pension scheme if you were close to breaching the pension lifetime allowance. However, it could now be beneficial for you to start paying into a plan again and take advantage of any valuable pension payments from your employer.

Have old pensions that do not offer flexible benefit options.

Pensions may now be treated differently with the new rules. Older pension plans may not have ‘modern’ features, such as, being able to flexibly access benefits. Therefore, this could mean that when you die, the funds will be unnecessarily taxed and your beneficiaries may receive less than you would have hoped for.

Are considering retiring within the next few years.

The amount you will now receive after the age of 55 could be significantly higher than previously expected. You might be able to bring your retirement date forward and take advantage of the removal of the lifetime allowance charge.

Are due to inherit a pension soon.

The pension changes take effect on 6 April 2023. They will then be finalised once the Finance Bill is passed. Deferring the payment of the pension death benefits could therefore reduce the amount of tax you may need to pay.

Returned to work but have drawn on your pension.

The increase of the money purchase annual allowance from £4,000 to £10,000 could mean you can re-join a workplace pension scheme and take advantage of generous employer contributions again. Consequently, when you do decide to retire, this could increase the value of your pension pot.

Have written death benefits into a trust.

Pensions that have designated a trust to receive benefits on your death might result in unnecessary tax.

Are above the threshold for the new free childcare for two year olds.

Making pension contributions could bring your income within the annual earnings limit of £100,000 and stop you falling off the childcare contribution cliff edge.

There is no better time to review your pensions with one of our experts. Due to the new rules, there are some cases where the right advice could be different to what you would have received a few months ago.