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Pension allowance changes, what are they and what do they mean?
21st April 2023
In March, Chancellor Jeremy Hunt unveiled his Spring Budget speech. This speech brought changes to pension allowances. And all in all, these changes are great news but what could the changes mean for you? Will they impact your retirement and savings income? Why is it now more important than ever that you should seek advice?
What are the changes?
The pension Lifetime Allowance charge has been abolished. This charge was taken when pensions benefits taken exceeded the £1,073,100 Lifetime Allowance. The maximum amount someone can withdraw from a pension tax free remains at £268,275 – 25% of the Lifetime Allowance in 2022/23. Above this, income from pensions is charged according to the income tax rate, but is not be subject to additional taxes.
There has been an increase in the pension Annual Allowance from £40,000 to £60,000. Individuals will still be able to carry forward any unused Annual Allowance from the previous three tax years as of present.
The adjusted income when the tapering of the Annual Allowance for high earners begins has increased from £240,000 to £260,000 and the minimum Annual Allowance someone with tapering can retain has increased from £4,000 to £10,000. Meaning that individuals with annual adjusted income of £360,000 or more will have an Annual Allowance of £10,000.
The Money Purchase Annual Allowance has also increased from £4,000 to £10,000, to encourage those drawing a pension to continue working.
Please get in touch with one of our Financial Planners here (‘here’ will be a link to contact page) to talk through how we could assist you to understand the implications of these changes. We can help to simplify the jargon and strategically work out how you may benefit from these changes. If you’re worried about getting in touch, it’s worth knowing that all of our initial calls are held at our own expense – there’s really nothing to lose!
Get in touch here.
Please note
All information is correct at the time of writing and is subject to change in the future.
Category: Industry News
