Chancellor Jeremy Hunt’s Spring Budget includes significant pension reforms, increasing the annual allowance to £60,000 and abolishing the pension lifetime allowance. The changes offer valuable pension planning opportunities.
The UK government has announced several significant changes to pensions in the Spring Budget. The annual allowance for pension contributions will increase from £40,000 to £60,000. This change aims to encourage individuals over 50s to return to employment. Additionally, the pension lifetime allowance (LTA), which limits the amount of tax relief a pension fund can benefit from, will be abolished. The minimum annual allowance for higher earners will increase from £4,000 to £10,000, while the taper will apply where adjusted income exceeds £260,000. The LTA will not apply from 6 April 2023. However, the tax-free amount will be restricted to £268,275 unless LTA protection applies.
Impact on Individuals
The changes offer valuable pension planning opportunities for those who have not yet accessed their pension pot. With the removal of the LTA, individuals can make contributions without the worry of exceeding the threshold. Additionally, the minimum annual allowance increase offers tax relief benefits for higher earners.
The UK government’s pension reforms, announced in the Spring Budget, will provide significant pension planning opportunities for individuals who have not yet accessed their pension pot. The changes include the increase in the annual allowance and the removal of the pension lifetime allowance. However, individuals should be aware of the changes to the tax-free amount, which will be restricted to £268,275 from 6 April 2023.