During his Autumn Statement earlier this week, the Chancellor, George Osborne, made two announcements which look set to affect pensions within the UK; although one of the announcements could see pensioners better off.
Within his statement on Wednesday Mr Osborne announced that the basic state pension will be rising by 2.5 percent, from April next year which will benefit millions of pensioners.
In addition to pensioners benefiting from the 2.5 percent increase in the basic state pensions, the Chancellor also announced technical changes to income drawdown limits set by the Government Actuary’s Department (GAD); which will see Mr Osborne raise the maximum drawdown from 100 percent to 120 percent of GAD limits.
The changes introduced to the GAD will mean that pensioners who leave their funds invested and live of the income the underlying assets generate, will be able to receive, in practice up-to a fifth more income from their savings.
However, whilst those who have already retired are set to benefit from changes introduced as part of Wednesday’s Autumn Statement, those currently saving could be hit by additional changes announced by the Chancellor, including slight change in the rules that effectively brings forward the cut in the annual allowance by a year.
Under the slight change to pension contributions, those contributions made as soon as next spring could count towards the savers annual savings in the following tax year; meaning that they would effectively be caught in the tax-free allowance from £50,000 to £40,000.
As such those looking to boost their contributions in an attempt to beat the cut need to take note of their pension input periods, which all start at different times of the year.
If you’re unsure how these changes could influence your pension or if you want to discuss how to make the most out of your pension, both now and in the future, come and speak to myself or a member of the Milsted Langdon team.
Milsted Langdon Director, Peter Groves, specialises in strategic business and tax planning, services for high net worth individuals and professionals.