4 ESSENTIAL BUDGET ANNOUNCEMENTS THAT COULD BOOST YOUR PENSION

In a bid to encourage early retirees back to work, chancellor Jeremy Hunt unveiled several changes to pension allowances during the Budget. Here are the four key pension changes.

1. The Lifetime Allowance will be abolished: Previously, the Lifetime Allowance (LTA) has limited the amount of pension benefits you could taxefficiently build up in total. It meant that some savers stopped pension contributions or even retired early because they didn’t want to cross the threshold. For the 2023/24 tax year, the charge for exceeding the LTA has changed to 0%, and it’s expected the government will abolish the LTA in April 2024.

2. The Annual Allowance has increased to £60,000: The maximum amount you can save into a pension tax-efficiently each tax year will rise from £40,000 to £60,000.

This means you can place up to £60,000 (or 100% of your annual earnings) and receive tax relief on your contributions. Tax relief is given at the highest rate of Income Tax you pay.

3. The Money Purchase Annual Allowance is now £10,000: If you’ve flexibly accessed your defined contribution (DC) pension, you may be affected by the Money Purchase Annual Allowance (MPAA). The MPAA reduces how much you can taxefficiently save into your pension. During the

Budget, Hunt announced the MPAA would rise from £4,000 to £10,000.

4. The amount high earners can tax-efficiently save has increased: The amount high earners can taxefficiently save into their pension is affected by the Tapered Annual Allowance. This allowance has now increased from £4,000 to £10,000.

The “threshold income” for the Tapered Annual Allowance has also increased from £240,000 to £260,000.

Should you increase your pension contributions in 2023/24?

There are many reasons why adding more to your pension makes sense. It’s a way to invest in your future and could mean you enjoy a more comfortable retirement. As you could receive tax relief on your contributions and investment returns are free from Capital Gains Tax, a pension could be a valuable way to invest for the long term.

However, you should keep in mind that pension contributions aren’t usually accessible until you are 55, rising to 57 in 2028. As a result, you couldn’t make a withdrawal to cover emergencies or other outgoings before you reach retirement age.

Please contact us on 01273 774855 or email shoreham@pembrokefs.co.uk if you would like more information and quote reference PFSIS.

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