Spring Budget 2023
As Prosperis celebrates its 20th year advising clients, it is fair to say that Retirement Planning has consistently been at the heart of what we do for our clients. It is no coincidence then, the pension regime that exists today was born out of a Government consultation in December 2002 called “Simplifying the taxation of pensions; increasing choice and flexibility for all”.
After much ministerial and inter-departmental wrangling with detail, on St Patricks Day 2004 (Budget Day) the Chancellor of the Exchequer, Gordon Brown, announced the new regime would be introduced from 6th April 2006 and “Pensions Simplification” commenced!
Looking back, the new system has been anything but simple. However, it has presented solutions and flexibility for pension savers and retirees that continue at the forefront of the service Prosperis provides its clients, whether they be private individuals and their families, or the many corporates we work with.
Today’s Budget sees a monumental shift in policy, particularly in light of the way the various allowances have evolved since April 2006.
The table below shows these changes and how they have changed under different governments:
Removal of the Lifetime Allowance
We will publish a more detailed summary of the various Budget announcements once we have had time to consider them in detail. However, I thought we should get this good news out sooner rather than later. The removal of the Lifetime Allowance limit should be seen as a very welcome shift in policy away from one of the most unfair taxes in the UK. We await the practical details in due course, including the implications on the tax free cash cap, but everyone will celebrate this positive move.
Annual Allowance increase to £60,000
Again, this is a very welcome positive change for retirement planning and it should be noted, whilst Corporation Tax is still going up, the increase in the Annual Allowance will be a useful tool to offset any pension payments against business profits.
Money Purchase & Tapered Annual Allowance
For those that have already accessed their pensions the amount that can be paid back into a pension increases from £4,000 to £10,000. Anyone with higher earnings will see the Tapered Annual Allowance increase also to £10,000, with the taper threshold lifted to £260,000.
All these changes take effect from 6th April 2023. Carry forward opportunities remain intact, so this is an opportune moment to speak to your Prosperis adviser, to undertake any year end tax planning, as well as look ahead with the new rules.