Spring Budget

Jamie Jenkins, Director of Policy & Communications at Royal London, says:  

Budget response

“The Chancellor’s sweeping reforms of pension taxes and expansion of childcare benefits will undoubtedly encourage more people to stay in work while enticing others who have already left employment to return. 

“Abolition of the Lifetime Allowance was not expected, but marks a progressive approach to retirement saving which alleviates the bizarre situation where many professionals feel they must leave their jobs to avoid triggering punitive taxes on their pension pots. 

“Moreover, the extension of childcare support will allow a greater number of parents – predominantly women – to return to work earlier and benefit from workplace pension saving, reducing the pensions gender gap. 

“Coupled with government-backed plans to reduce the age for auto-enrolment for pensions to 18, and abolishing the lower earnings limit for contributions, this feels like a welcome return to longer term thinking on retirement policy.” 

Sarah Pennells, Consumer Finance Specialist at Royal London, says:

Energy

“Millions of people across the UK will be heaving a sigh of relief at the news that the energy price guarantee has been extended by a further three months.

“The Chancellor’s announcement means that energy bills for households with typical gas and electricity use, paying by direct debit, will be limited to £2,500-a-year, instead of the £3,000 ceiling which was scheduled to begin on April 1.

“Without the government’s energy price guarantee, a typical household would be facing energy bills of £3,280 a year, which is the energy regulator Ofgem’s current energy price cap.

“In May, Ofgem is due to announce the energy price cap that will take effect from July and if wholesale energy prices continue to fall, the cap could be set at a level whereby the government’s energy price guarantee isn’t needed beyond the extension announced in the budget.”

Clare Moffat, Pensions Expert at Royal London, says:

Lifetime Allowance abolition

“Jeremy Hunt’s decision to abolish the lifetime allowance altogether was the ‘rabbit out of the hat’ moment that no one expected.

“This announcement underscores how the Lifetime Allowance has become a mainstream concern in recent years.

“While abolition was not expected, the government has acknowledged that too many workers in well-paid jobs are opting for early retirement or reduced duties rather than face paying punitive taxes on their retirement savings. This was particularly relevant to senior NHS doctors, a group vital to clearing hospital waiting lists.

“Allowing these people to save more money into their pension without a tax charge can only incentivise them to remain in work longer – a boon for both the Treasury and employers attempting to retain talent in a tight labour market.”

“The maximum tax free cash payable remains at £268,275  -25% of the current lifetime allowance.”

Annual Allowance boost from £40,000-£60,000

“Jeremy Hunt’s decision to boost the annual pension allowance from £40,000 to £60,000 will be welcomed, particularly by senior NHS doctors, many of whom have experienced significant annual allowance tax charges in recent years. This has seen many of them leave, creating staffing shortages at a time when the country desperately needs doctors to clear record waiting lists.

“Although the increase won’t apply to previous years, moving forward fewer people will be affected.

“This will also be a boost for the self-employed who might not have been saving as regularly into pensions over the years due to the credit crunch, COVID and the cost-of-living crisis. This increase broadens the scope for making significant contributions as they approach retirement.

“The tapered annual allowance is also to be increased. This will impact anyone with income over £260,000 instead of £240,000."

Money Purchase Annual Allowance boost from £4,000-£10,000

“Jeremy Hunt’s decision to increase the MPAA to £10,000 will be broadly welcomed by those seeking flexible retirement, those who have had to access pensions due to the cost-of-living crisis, as well as employers struggling to retain workers in a tight labour market.

“The government has been under mounting pressure to boost the MPAA ceiling as part of a broader shake-up of pension rules, with many arguing the existing £4,000 limit is overly restrictive.

“Many older workers favour easing themselves into retirement gradually, and with today’s announcement Mr Hunt has acknowledged that withdrawing money from your pension shouldn’t prevent you from continuing to save towards full-time retirement.

“The Chancellor’s announcement will empower older workers to combine pension income with employment income, while continuing to save for their future.

“For those who have already exited the jobs market entirely, there are now more incentives to return to work if their circumstances suddenly change. With virtually all employees now automatically enrolled into pension saving, the £4,000 MPAA seemed at odds with the aim of enticing older workers back to employment.

“For those who have had to access pensions, due to the cost-of-living crisis, this increase offers the opportunity to replace withdrawn savings with less restriction.”