From the cost-of-living crisis to savings limits, there is plenty for savers to consider when putting money into and accessing their pension.
There are “several changes on the horizon”, said Which?, that could help or hinder your retirement savings, even before you consider the “looming general election” and a spring Budget.
Here are some of the major changes taking place in 2024.
State pension
State pensioners will get an “inflation busting” increase to their weekly payments from April, said Hargreaves Lansdown. This is due to the retention of the triple lock policy, which sees state pensions rise by 2.5%, inflation or average earnings, depending on what is the highest that year.
The state pension is set to increase by 8.5% to £221.20 a week from the new tax year on 6 April 2024.
Pension credit, an additional sum for pensioners on a low income to bring their weekly money up to a minimum level, will also be increased by the same percentage amount.
The move will be “welcomed by many”, said Helen Morrissey, of Hargreaves Lansdown. However, calls for reform are likely to continue due to the “burgeoning cost” of the system.
Voluntary pension contributions
A deadline to purchase voluntary National Insurance contributions to fill pension gaps has been extended from 31 July 2023 to 5 April 2025.
As one’s National Insurance record can often dictate how much you will be entitled to in the form of the state pension, the deadline extension is likely to be helpful.
It will offer people more time to check their personal records to see if they have any shortfalls.
The Department for Work and Pensions has said it is planning to launch an online system where people can purchase contributions, explained the Daily Mirror, “after their phone lines were jammed with people trying to get through”.
No date has been set but it is expected in the spring, added Hargreaves Lansdown.
Lifetime allowance abolished
The pension lifetime allowance (LTA) – capping how much can be saved in a pension overall at £1,073,100 – will be abolished from 6 April 2024.
This is “good news”, said Rest Less, especially for people who have built up a “substantial pot”.
The threshold may have been high, added Which?, but the LTA was “particularly impacting doctors and consultants”, who were quitting the NHS once they “neared or reached the threshold” to avoid a big tax bill.
Instead, there will be a £268,275 cap on the tax-free lump sum you can take from your pension.
Auto-enrolment changes
The minimum age for being placed into workplace pension schemes under auto-enrolment is set to drop from 22 to 18.
While in the past, employees could choose if they wanted to be opted-in to their workplace pension, auto-enrolment sees workers who meet certain requirements automatically added without needing to ask.
The drop in age will “help more people build bigger pensions, particularly women and people in part-time work”, said Hargreaves Lansdown.
However, nothing has “officially changed” yet, explained The Sun, and a consultation on the changes is expected this year.
A pension pot for life
Chancellor Jeremy Hunt unveiled a consultation during his Autumn Statement on letting workers have a “pension pot for life”.
This would let people ask their boss to pay pension contributions into the pension of their choice, explained the Daily Mirror, and “lower the risk of people having multiple, smaller pension pots, and losing track of their retirement cash”.
This could take years to become a reality, warned Which?, but in the meantime you can combine your old pensions into one scheme to make it “easier to keep tabs”.
There is plenty to consider when putting money into or accessing your pension this year
