Ahead of Chancellor Jeremy Hunt’s Spring Budget, which is largely expected to look to bring over-50s back to work and to bring big changes to pensions legislation through the LTA and annual allowances, finance experts have been sharing their thoughts with IFA Magazine as follows:
Lily Megson, Policy Director of My Pension Expert said: “Jeremy Hunt was thrown a hospital pass when he took over as Chancellor following Kwasi Kwarteng’s disastrous mini-Budget. But tomorrow is his chance to give much-needed detail about how he plans to rebuild a UK economy teetering on the brink of recession and, moreover, provide vital assurances to Britons who are trying to manage their finances and plan for the future amid such turbulence.
“For certain, ‘early retirees’ will come into Hunt’s crosshairs. For months now he has heralded his intention to get over-50s back into work in an effort to tackle economic inactivity, with those who retired during the first two years of the Covid pandemic a particular focus. Reports suggest that increasing the lifetime allowance and the £40,000 annual cap on tax-free contributions to pensions are among the Budget’s policy reforms that will support Hunt’s attempts to keep people working longer.
“However, while such changes would come as a boost to some, the underlying issue is that the Chancellor risks demonising those who do not want to work until their late 60s. Instead of trying to force retirees back into employment, the government ought to empower them to plan for the future they want and deserve. Namely, the Budget should include plans to ensure more people can access the information and advice they need to make informed decisions, putting them in control of their retirement plans.
“Skills bootcamps, ‘midlife MOTs’ and sickness benefits reform are also likely to feature in Hunt’s “back to work” Budget. Whether he gives the same amount of attention to those feeling pressured to delay or come out of retirement after decades of hard work and diligent saving due to soaring cost of living – only time will tell.”
Talking about possible changes to the LTA, Pete Glancy, Head of Policy at Scottish Widows, comments:
“By increasing the Lifetime Allowance to £1.8m and the Annual Allowance to £60k, this Budget has begun to address some key issues, but there is a clear opportunity to make practical changes with short-, medium- and long-term benefits.
“The previous allowances on pension savings, set at £1,073,100 and £40k respectively, were designed for a bygone era of low inflation and steady wage growth. Recently, the Lifetime Allowance penalised savers who exceeded the threshold with a punitive tax penalty of 55%, even if their pots simply keep pace with rising prices. This has driven senior professionals out of the workforce, draining the economy of much-needed skills, experience, and productivity. The Annual Allowance, meanwhile, has prevented senior professionals from being able to save more than £40k into their pensions each year .
“Increasing these allowances will improve the fortunes of both working people and the public purse. Bigger pension pots not only mean more money for people to spend in retirement, they also mean higher tax receipts in the long run as the extra retirement income is also subject to taxation. This significant increase to the allowances is a welcome improvement on previous Budgets, and will help to get the country’s economy back on track.
“I hope that this is the first of a series of annual reviews into the allowances, to ensure they keep pace with inflation so savers are not unduly punished.”