Posted by tudor 18th March 2020

What does the new budget mean for pensions?

State pensions
The new single-tier State Pension will increase from £168.60 a week to £175.20 in April 2020. For pensioners receiving the older basic State Pension, this will increase from £129.20 to £134.25 per week (3.9% increase). For spouses/civil partners this will increase to £80.45 per week.

The rise is the result of the triple-lock system, which means that the State Pension rises in line with inflation, earnings or 2.5%, whichever is the highest.

Private pensions
To support the delivery of public services, particularly in the NHS, the two tapered Annual Allowance thresholds for pensions will each be raised by £90,000. So, from 2020-21 the threshold income will be £200,000, meaning individuals with income below this will not be affected by the tapered Annual Allowance. The Annual Allowance will only begin to taper down for individuals who have an adjusted income above £240,000 (the £200,000 allowance plus the £40,000 you can save into your pension). For every £2 of adjusted income over £200,000, the annual allowance will reduce by £1.

For individuals with income over £300,000 the minimum level to which the Annual Allowance can taper down will reduce from £10,000 to £4,000 from April 2020.

The Lifetime Allowance for pensions will increase in line with the Consumer Prices Index (CPI) for 2020-21, rising to £1,073,100.

Annual allowance charge on excess is at applicable tax rate(s) on earnings
Lifetime allowance charge if excess if drawn as cash 55%; as income 25%
Pension commencement lump sum up to 25% of pension benefit value

If you would like to know more about how pension allowances may impact your retirement planning please get in touch.

HM Revenue and customs practice and the law relating to taxation are complex and subject to individual circumstances and changes that cannot be foreseen.

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