Published
21st March 2023
On 15 March 2023, Chancellor Jeremy Hunt made significant changes to pensions in his Spring Budget. He announced changes to both the lifetime allowance (LTA) and the annual allowance by increasing the limits on pension savings.
The lifetime allowance limit was previously fixed at £1,073,100 until 2026, but the Budget proposes that the lifetime allowance charge is to be removed from April 2023, and abolished completely from April 2024. This change was driven by NHS doctors who are in a defined benefit scheme similar to the Local Government Pension Scheme and is part of a drive to encourage over 50s back into the workplace.
The annual allowance is the maximum amount of money a member's pension benefits can grow by in each scheme year without incurring a tax charge. This limit is currently £40,000, but the Budget proposes that from 6 April 2023, this will increase by 50% to £60,000.
The Lifetime Allowance (LTA) charge removed from 6th April 2023.
The Lifetime Allowance (LTA) charge abolished from 2024.
Maximum pension commencement lump sum (PCLS) for members without previous transitional protections will be fixed at its current level of £268,275 (25% of £1,073,100).
The standard Annual Allowance (AA) will increase from £40,000 to £60,000.
The Money Purchase Annual Allowance (MPAA) will increase from £4,000 to £10,000.
The income level for the tapered Annual Allowance will now apply from £260,000 (previously it was from £240,000).
The Government will introduce legislation in the Spring finance Bill 2023 to accommodate the changes. Following this, and as soon as we receive guidance, we will provide a further update on our news page.
