Page 21 - Budget Newsletter - March 2023

RETIREE / AT RETIREMENT

The pension landscape in Spring 2023

There have been many changes to pensions in recent years. The latest revolved around the tax
regime:

• The LTA, which sets a tax efficient maximum value of pension benefits, will effectively be
scrapped from 6 April 2023. LTA charges and the various transitional protections will thus
fall away. The Labour Party has already announced it will reverse this move if it wins the
next election.

• The annual allowance, which sets a tax efficient ceiling on total yearly pension
contributions, will increase to a maximum of £60,000 from 2023/24, subject to tapering and
a new £10,000 minimum tapered allowance. More importantly for those leaving full time
employment, the MPAA, which is triggered the first time that certain pension benefits are
drawn (for example on drawing income under flexi-access drawdown or taking an
uncrystallised funds pension lump sum (UFPLS)), will rise to £10,000, making phased
retirement easier.

• A new cap on the tax-free pension commencement lump sum will be introduced from
2023/24. This will be set at £268,275, matching the effective ceiling imposed by 25% of the
current LTA. There will be an exception for anyone who already has a protected right to take
a higher pension commencement lump sum.

If you had planned to draw benefits soon, you should seek advice as soon as possible on the effects
of these reforms.

Earlier changes to pensions include:

• 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. An announcement of a further
phased rise in the SPA to 68 from April 2037 had been expected in the Budget but did not appear.
The move remains on the agenda with a DWP announcement now imminent.

• The single-tier state pension started on 6 April 2016. It is worth checking whether your NICs
record will gain you the maximum pension available. If not, there is a window recently extended
until 31 July 2023 to catch up missed NICs back to 2006/07.

• The Triple Lock, which increased the new and old state pension by the greater of earnings
growth CPI inflation and 2.5%, and was suspended for April 2022, but reinstated for this April’s
increase, which will be 10.1%.

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