What you need to know about the Spring Budget 2023
Listed Under: News
Chancellor Jeremy Hunt abolishes the pension Lifetime Allowance, raises the annual allowance for pension contributions to £60,000 and raises the Money Purchase Annual Allowance to £10,000
The Lifetime Allowance (LTA) capped the amount that people could put into their pensions before facing a tax penalty. Those who breached the LTA had to pay 25% on any regular withdrawals and 55% on any lump sum withdrawals, although the maximum Pension Commencement Lump Sum (PCLS) will remain capped at £268,275. No lifetime allowance charges will be payable in the 2023/2024 tax year and from the 2024/2025 tax year the lifetime allowance will be abolished completely. The abolishment of the Lifetime Allowance will benefit mainly those with large Defined Benefit pension scheme’s (such as those in the public sector) and those who have already used up all their full LTA.
Those who are still in the accumulation period of their pension and want to reap the benefits of putting the most into their policy as they can, now have the chance to put in a further £20,000 into their pension, with the annual allowance being increased from £40,000 to £60,000 gross. As pension contributions are based on your earned income, the chancellor has also increased the adjusted income threshold, from £240,000 to £260,000, thus meaning your annual allowance will only taper should you earn over the latter amount. For very high earners (those earning over £360,000 per annum) their minimum tapered annual allowance will increase from £4,000 to £10,000. This increase in contributions also applies to any clients who are impacted by the money purchase annual allowance.
Should you wish to discuss the position of your pension, please get in touch.