As widely trailed in the press, there were some significant changes affecting pension schemes in the Spring Budget delivered by the Chancellor Jeremy Hunt of Wednesday 15 March 2023.
- The lifetime allowance for pensions will be abolished from April 2024, with the lifetime allowance charge withdrawn from April 2023.
- A new monetary limit for the tax-free pension commencement lump sum will be introduced for 2023/24 of £268,275 (equivalent to 25% of the current standard lifetime allowance).
- The annual allowance for pensions will increase by 50% from £40,000 to £60,000 from 2023/24.
- From 2023/24 the tapered annual allowance threshold has increased. The individual’s annual allowance will be subject to tapering when an individual’s threshold income exceeds £200,000 and their adjusted income exceeds £260,000.
- The minimum annual allowance resulting from the application of taper rules will be increased from £4,000 to £10,000 from 2023/24.
- The money purchase annual allowance, the annual amount individuals can contribute to a Defined Contribution pension after having previously accessed a pension flexibly, will rise from £4,000 to £10,000 from 2023/24.
However the Labour Party have said that, if elected, they would reinstate the lifetime allowance on pension savings. With the next UK general election scheduled to be held no later than 24 January 2025, this creates some uncertainty around pension planning.
Other key headline items include:
- The inflation rate is forecast by the Office for Budget Responsibility to fall from 10.1% (January 2023) to just 2.9% by the end of 2023.
- The energy price guarantee is maintained at the current £2,500 level until the end of June 2023.
- Up to 30 hours of free childcare per week will be available to working parents of children from the age of nine months by September 2025. Initially, from April 2024, working parents of two-year-olds will be able to access 15 hours of free childcare per week.
- The scheduled 11p a litre duty increases in petrol and diesel will not go ahead.
As ever the Budget documentation contains a wealth of detail and much to digest. If you have any questions about how the Spring Budget affects you, please get in touch.