Page 18 - Budget Newsletter 2021

Retiree/At Retirement

The pension landscape in Autumn 2021

There have been many changes to pensions in recent years, including:

• Three reductions in the standard lifetime allowance brought it down from £1.8m in 2011/12 to £1m for 2016/17.
This allowance effectively sets a tax-efficient ceiling for the value of pension benefits and, from April 2018, started
to rise annually in line with CPI inflation. However, that has now ceased, meaning the allowance will remain at
£1,073,100 until 6 April 2026.

• Further increases to the SPA, both legislated for and planned. For men and women, SPA reached 66 last year. The
next step up to a SPA of 67 will start in April 2026.

• New rules, which have given much greater flexibility in drawing benefits from money purchase schemes, started
on 6 April 2015 and have encouraged many people to turn their entire pension pot into (mostly taxable) cash. The
new flexibility was accompanied by more generous tax treatment of death benefits, adding to the opportunities
that pensions offer for estate planning.

• The single-tier state pension started on 6 April 2016. If you are near to state pension age, it is worth checking
whether your NICs record will gain you the maximum available.

• The Triple Lock, which increased the new and old state pension by the greater of earnings growth, CPI inflation
and 2.5% has been suspended for the coming year. The earnings growth element (8.3% due to pandemic created
distortions) has been dropped, limiting the 2022/23 increase to September’s annual CPI inflation (3.1%). As a
result, the new state pension, launched in April 2016, will not have kept pace with earnings. The removal of the
Triple Lock, although only for one year, will save the Treasury £5.4bn in 2022/23, rising to £6.7bn in 2026/27.

Goodbye Triple Lock

CPI Inflation Earnings Growth Actual increase Triple Lock

10

8

6
INCREASE % 4

2

0
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23

-2

17