UK Pensions – Spring Budget 2023: Implications for pension schemes
The Chancellor of the Exchequer, Jeremy Hunt, has delivered the Government's Spring Budget for 2023. The pensions-related Budget announcements are the most significant we have seen for some years:
- Lifetime allowance: The lifetime allowance, the maximum amount someone can accrue in a registered pension scheme in a tax-efficient manner over their lifetime, will be abolished entirely from April 2024. Prior to that, the lifetime allowance charge will be removed from 6 April 2023.
- Annual allowance: The pensions annual allowance, the maximum amount of tax-relieved pension savings that can be accrued in a year, will be increased from £40,000 to £60,000 from 6 April 2023.
- Money purchase annual allowance: The money purchase annual allowance will be increased from £4,000 to £10,000 from 6 April 2023. This will impact only members who have flexibly accessed their benefits and who subsequently make further contributions to their pension arrangement.
- Tapered annual allowance: For those on the highest incomes, the annual allowance tapers down from £40,000 to £4,000. The minimum tapered annual allowance will be increased from £4,000 to £10,000 from 6 April 2023. The adjusted income threshold for the tapered annual allowance will also be increased from £240,000 to £260,000 from 6 April 2023.
- Pension commencement lump sum: The maximum pension commencement lump sum for those without protections will be retained at its current level of £268,275 and will be frozen thereafter.
- DC scheme investment: The Government will work closely with industry and regulators to bring forward a package of measures by the autumn to “unlock” defined contribution (DC) pension fund investment into the UK’s innovative firms.
- Midlife MOT: The Government will expand and improve the midlife MOT tool to support individuals with planning for later life by, amongst other things, working with employers and pension providers to encourage signposting to the midlife MOT and related support.
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