At lunchtime on Wednesday 22 November, the chancellor delivered his 2023 Autumn Statement. That afternoon, you might have read our update, Everything you need to know about the 2023 Autumn Statement in which we summarised Jeremy Hunt’s key announcements.
But not all of the changes made in the Autumn Statement made it into the main speech. Some were only released later, hidden in the small print of the government’s Autumn Statement policy paper.
Here we take a closer look at some of the announcements you might have missed.
Keep reading to find out what else the chancellor has in store and what his changes might mean for your long-term pension plans.
- The abolition of the Lifetime Allowance will go ahead from April 2024
News on the abolition of the Lifetime Allowance (LTA) was missing from the speech itself. It was confirmed in the policy paper, though, that the measure will go ahead as planned. The LTA will be abolished from 6 April 2024.
This surprise announcement was originally made in the Spring Budget back in March 2023. You might have read How the chancellor’s shock Budget changes might affect your estate planning from earlier this year, but there are pension consequences to consider too, now that the change has been confirmed.
The LTA marked the amount you could withdraw from your pensions during your lifetime, without becoming liable for an LTA charge. While the limit still stands at its 2022/23 figure of £1,073,100, the charge is currently set to 0% and will be completely removed from 2024.
This presents an opportunity to save and withdraw more from your pension. While you’ll still need to keep within the Annual Allowance to ensure your contributions receive tax relief, the Annual Allowance has recently increased to £60,000 (for the 2023/24 tax year).
Importantly, the limit for tax-free cash pension withdrawals remains at 25% of the current LTA amount, or £268,275. It’s also worth noting that if you have LTA protection from HMRC, you’ll need to think carefully about the amount you contribute. Labour was quick to confirm they’d look to reinstate the LTA if elected, but this could prove far from straightforward.
Speak to us if you would like to take advantage of the current rules or the new rules post-April 2024 and we can help to find the right solution for you.
- The abolition of the LTA could mean changes to the way pension benefits are taxed on death
Authorised lump sums and lump sum death benefits will be tested against a new threshold, set at the same level as the present LTA, £1,073,100. This will be known as the “Lump Sum and Death Benefit Allowance”.
Individuals will not pay tax where lump sums do not take them above this level. Any lump sums paid above this level will be taxed at the highest rate of tax the individual or beneficiary pays.
The proposals state that if you die under the age of 75, any lump sums paid from your pension benefits will be Income Tax-free if they fall below your remaining Lump Sum and Death Benefit Allowance. This is the case whether these benefits were in payment or not, and assuming they are paid within HMRC’s specified two-year period.
Any excess over your remaining Lump Sum and Death Benefit Allowance will be taxed at each beneficiary’s marginal rate of Income Tax.
If you die at age 75 or over, any lump sums paid from uncrystallised or crystallised benefits will be taxed at the highest rate of tax the recipient pays.
- The government is consulting on plans to reduce the number of pensions workers hold
The chancellor used his speech to announce a consultation into allowing UK employees to use their pension fund as a “pot for life”.
Back in July 2022, MoneyAge reported that the average UK worker will have 11 different jobs during their career. Since auto-enrolment arrived, that could mean a different pension pot with each company.
Under Jeremy Hunt’s new plan, you’ll have the option to have your workplace pension paid into the pension pot of your choice. This means you’ll have the option to keep the same pot throughout your career.
This will make managing your pension much easier, as there will only be one firm to deal with, and one pot containing your whole pension fund.
If this simplicity appeals to you, you might want to look into the possibility of consolidating your existing pots before the consultation ends. We can help you look at the pros and cons of this so get in touch now.
Get in touch
If you have any questions about the announcements made in the Autumn Statement, or how those changes might affect your long-term plans, speak to us now. Please contact us on email@example.com or call 01234 713131.
This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.