In recent years it has been difficult to maximise the benefits of pensions due to allowance thresholds. But after the March 2023 Budget Statement from Chancellor Hunt, the tide is changing. No longer burdened by a lifetime allowance charge and with an increase in pension annual allowance, your retirement income could be revitalised. Learn why it’s more important than ever to focus on your pension.
This does not constitute advice and advice should be sought in all instances before acting on it. The Financial Conduct Authority does not regulate tax advice.
These new changes are a game changer for those who have sizeable pension funds, especially if they are close to or have already surpassed the lifetime allowance threshold. Now that you will no longer have an imposed limit, you can contribute as much as you want — up to the new annual allowance threshold of £60,000, of course — into your fund and you don’t have to worry about punitive tax charges when it’s time to withdraw.
Opportunity to act
If, in the past, you weren’t able to take advantage of opportunities such as your employer’s pension scheme due to concern of exceeding the threshold, you can now do so. In fact, if you have returned to work after already starting withdrawals on your pension, you can rejoin a workplace pension scheme thanks to the increase of the money purchase annual allowance to £10,000 and really increase the value of your pension pot before fully retiring.
And if you previously applied for any lifetime allowance protection, now is the time to review any protections you have so you can have more flexibility with your contributions.
This is especially great news if you were planning to retire within the next few years. You can really maximise your contributions in the last few years to allow for more money when you retire or you could even opt to bring your retirement date forward if finances allow.
Plus, making additional pension contributions might mean your income falls to the limit of £100,000 where you could take advantage of the new free childcare initiative.
Professional advice on pensions
With all of these pension changes coming down the line, it’s a great time to speak to your trusted financial adviser, even if you met with them recently. These new rules could mean the advice you receive changes completely, so it’s best to stay on top of it. To learn more about how these pension updates affect you, contact us today.