Pension Budget changes in FULL - what Rishi Sunak's announcement means for you

Asia's Tech News Daily

The UK has witnessed spectacular upheaval of pensions policy throughout the coronavirus pandemic, including the pause on the flagship Triple Lock policy which has left pensioners worse off. Individuals have been expecting to hear what’s in store for their savings in the Budget this afternoon. In September, the Government confirmed it would freeze the Triple Lock – which guarantees the state pension will increase by the highest of inflation, average earnings growth, or 2.5 percent. The Government put a hold on the lock when earnings grew after many people returned from furlough.

What did the Chancellor announce about pensions today?

The Chancellor did not make any announcements regarding the Triple Lock today, however did make other changes to pensions.

He said the Government will consult on changes to the regulatory charge cap for pension schemes, in a bid to allow more institutional investment.

The cap, put in place in 2016, protects employees who are auto-enrolled into their pensions from having their retirement pot eaten into by higher charges.

Pension Budget changes in FULL - what Rishi Sunak's announcement means for you
© PA Rishi Sunak

Kevin Mountford from Raisin UK explained to Express.co.uk readers: “If you build up a pension that exceeds the lifetime allowance, you can end up paying tax at a rate of 55 percent if you take the money as a lump sum.

“The lifetime allowance is currently £1,073,100, but this has been frozen until 2026.

“The amount of tax-free cash that people can pay into their pension each year is currently set at £40,000, but is now potentially being lowered to £30,000/£20,000 (but not yet confirmed by the Government).

“Whilst this may only affect people who make very large pension contributions, it could also affect people whose income has not been relatively fixed throughout their working life.”

Pension Budget changes in FULL - what Rishi Sunak's announcement means for you
© GETTY Pensioner

“Slightly concerned about glib ‘regulatory unlock for pension charge cap’ i.e., increasing the charges cap so funds can charge more. This can be positive, as it allows a wider choice, but must not be allowed to push up the norm for charges for simple funds.”

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However, there was little else in the way for savers and pensioners in this Autumn Budget.

Money Expert Martin Lewis said on Twitter: “Slightly concerned about glib ‘regulatory unlock for pension charge cap’ i.e., increasing the charges cap so funds can charge more.

“This can be positive, as it allows a wider choice, but must not be allowed to push up the norm for charges for simple funds.”

Former Pensions Minister, Sir Steve Webb tweeted: “Relaxing pension charge cap to encourage illiquid investments is really missing the point – most schemes are well below the charge cap and barriers to investment are not primarily about charges.”

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Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown said: “We welcome the consultation on reform of the DC charge cap announced in today’s Budget. While introduced to safeguard value for scheme members we know that cost is only one determinant of value.

“There will be appetite to invest in more illiquid assets, especially if it aligns with people’s values of a greener future and this would prove difficult with the charge cap in its current form.

“We await the full detail, but it will be interesting to see if this may also read across to charges on drawdown investment pathways.”

Shona Lowe, financial planning expert, at abrdn, told Express.co.uk: “Today’s speech by the Chancellor means many can breathe a sigh of relief that their private pensions, investments and savings haven’t been impacted by any tax changes.

It’s reassuring in the current environment, but we never know when that might change.

“The key takeaway for me is the continuing importance of using current reliefs and allowances to make sure you’re being as tax efficient as you can – it may be useful to seek advice to ensure you are maximising what you have to enjoy now and in the future.”

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