I always think there is a time and a place for a bit of chit chat and waffling, but my monthly blog is not one, I always like to get straight into it. Many of yesterday’s announcements had already been leaked but there were a few little surprises. Unsurprisingly I am concentrating on the news relating to pension changes. However, a full summary is available on the BBC Budget summary.
Budget 2023 Pension Highlights
· Increase to the pension contribution Annual Allowance from £40,000 to £60,000 from 6thApril 2023.
· Increase money purchase annual allowance from £4,000 to £10,000 and the minimum tapered annual allowance from £4,000 to £10,000 from 6th April 2023.
· Removal of the lifetime allowance from 6th April 2023.
· The maximum pension commencement lump sum (tax free cash) for those without any protections will be retained at its current level of £268,275 and will be frozen thereafter. This has maybe gone underneath the radar a little.
It’s not for me to say either way if these announcements are good or bad, or whether this was the right thing to do. But one thing I can say is the government are certainly encouraging individuals to continue to fund pensions.
I heard a Labour spokesperson on the radio this morning saying they would reverse the removal of the lifetime allowance (except for NHS staff)….this goes to show you can’t legislate for government changes.
We appreciate some of this terminology you might not be familiar with and it’s our job to simplify the complex. Rest assured Pete and I will be contacting clients in due course where we think further pension planning could be possible. However, if you have any questions about the budget please do not hesitate and contact us.
Whilst the budget is given a lot of press coverage earlier this month the government announced that thousands of taxpayers have been given more time to fill gaps in their National Insurance record to help increase the amount they receive their in State Pension.
I’ve had a few clients ask questions about this recently so I thought it would be a great topic to investigate further.
· 2016 the state pension changed in order to try and simplify how it works.
· You now need 35 years’ worth of National Insurance contributions to be eligible for the full new state pension.
· You can request a state pension forecast to see if you are on track via your government gateway account.
· After 31st of July you can only fill in gaps going back 6 years.
· Until July 31st you can go back to 2006.
· The state pension is great value.
· A full payment of 52 weeks at £15.85 per week in2022/23 would be £824.20 and would increase your State Pension by 1/35 of the single tier State Pension. This means that a £824.20 investment would produce a State Pension entitlement of £275.08 pa in today’s terms. The State Pension increases in payment by at least 2.5% per annum and Class 3 NICs can represent excellent value for money.
· You already guaranteed to receive close to the full state pension amount.
· If you die before reaching state pension age having already purchased added years.
· If you are likely to work enough years to be eligible for the full state pension then there is probably little benefit.
Remember….. If you earn between the Lower Earning Limit (currently£123 per week) and the Primary Threshold (currently £242 per week) you will receive National Insurance credits, entitling you to basic National Insurance benefits, including the state pension, but you won't actually pay any National Insurance contributions.
Speak with the Future Pension Centre, and they can tell if buying extra years will increase your state pension. They will give you confirmation based on your specific circumstances. Not everyone will see an uplift through purchasing added years.
We always recommend obtaining a state pension forecast to see if you are on track and like always Pete and I are on hand to answer any questions you may have.