Pension rules and limits stay the same
At the 2022 Autumn Statement, the Chancellor, Jeremy Hunt, brought in no changes to pensions rules and limits. The lifetime allowance will remain frozen at £1,073,100 until 2026 along with the annual allowance, which is currently set at £40,000. However, the State pension triple lock will remain in place, which means that State pensioners will enjoy an increase of 10.1% from April 2023, equating to £870.
Changes to CGT and additional-rate tax threshold make pensions even more attractive
While there have been no changes to pension savings limits, the Autumn Statement has made pensions an even more attractive savings vehicle.
- With the reduction in the additional-rate threshold from £150,000 to £125,140 in April 2023, more people will enjoy greater income-tax relief on their pension savings
- The capital gains tax annual exempt amount is reducing from £12,300 to just £6,000 in April 2023 and to just £3,000 in April 2024. This will make it much more difficult to manage out capital growth in an investment account but investments in both pensions and ISAs grow free from capital gains tax
The frozen lifetime allowance presents challenges
Because the lifetime allowance remains frozen at £1,073,100 until 2026, more and more pension savers, including middle income earners, will need to take this threshold into account. While the lifetime allowance can seem like a big number, as people save for several decades of retirement and their pension funds increase over time with higher earnings and investment returns, exceeding the allowance becomes more likely.
When weighing up the lifetime allowance against the generous tax benefits offered by pensions, your individual circumstances and priorities are important.
Autumn Statement 2022
Analysis and commentary from the experts at Evelyn Partners, identifying the key tax changes and outlining the practical implications for you and your business.