By Marc Stemmer, Founder and Director
With the Autumn Statement delivered, it’s clear that millions of pensioners are set for a significant increase in their income this spring.
Chancellor Hunt’s confirmation that the State Pension will increase by 8.5 per cent from April 2024, honouring the Triple Lock, is a crucial aspect of the statement. This increase, one of the largest in history, demonstrates the Government’s support for pensioners.
While this increase is a welcome development for many pensioners, it’s important to note that frozen tax thresholds could lead to higher tax bills for some. This aspect has led to concerns that the Chancellor’s pension increase might be somewhat undermined.
Another key point in the Autumn Statement was the confirmation that income withdrawals taken by beneficiaries, where the member died before age 75, will remain untaxed.
This decision reverses the stance held by HM Revenue & Customs (HMRC) in the summer, which would have taxed such withdrawals.
Under the current rules, if you pass away before 75, your beneficiaries can inherit your defined contribution pension tax-free, provided it’s under your lifetime allowance.
This brings us to another significant announcement. HMRC has confirmed that these pensions will continue to be tax-free from April 2024. Had the Government proceeded with the proposed tax treatment change, there would have been a push towards taking remaining funds as lump sums.
The Autumn Statement also confirmed the Government’s plan from the March Budget to scrap the lifetime allowance from 6 April 2024. This is a major shift in pension policy, and we’re eagerly awaiting the finer details in the upcoming Autumn Finance Bill.
Finally, the Chancellor’s announcement on pension pot reforms is a significant development. The proposed consultation on allowing pension savers a legal right to require new employers to contribute to their existing pension pots is a forward-thinking move.
These reforms could potentially unlock an additional £1,000 a year in retirement for an average earner starting savings from age 18.
The Autumn Statement brings several positive changes for pensioners and future retirees. The commitment to the triple lock and the decision to maintain tax-free status for certain pension withdrawals are particularly noteworthy.
As we await further details in the Finance Bill, it’s clear that these developments will have a substantial impact on pension planning and wealth management strategies.
Pensioners and future retirees will need to understand how these developments impact their financial planning.
The increase in the state pension, the continuation of tax-free status for certain pension withdrawals, and the upcoming reforms in pension pot management present both opportunities and challenges.
Whether you’re assessing the impact of the increased state pension on your tax liabilities, planning for inheritance scenarios, or considering how to best utilise your pension funds, our team has the expertise to provide tailored advice.
Contact us today to explore how these changes affect you and to work out the best path forward for your pension and retirement planning.
