Spring Budget 2023: What are the pension tax changes?
15 March 2023, 14:17 | Updated: 15 March 2023, 15:18
Have they increased the retirement age? And what rules have changed for both state and private pensions? Here's what Jeremy Hunt's Budget 2023 said.
Jeremy Hunt has kept to his promise on encouraging people back to work with new schemes including an extension on free childcare and changing both private and state pensions.
In a bid to encourage over 50s to work longer, the Chancellor of Exchequer confirmed in the Spring Budget 2023 there would be a big rise in the amount people could save in their pensions before being taxed.
Here's how pensions will be changing as a result of the Spring Budget 2023.
What are the pension tax changes?
The biggest changes for pensions come for those who earn higher amounts and pay into a private pension.
The Chancellor confirmed that both the pension lifetime allowance and annual pension allowance would change meaning there would be tax relief for longer on lifetime savings.These are:
Pension lifetime allowance
The pension lifetime allowance - the maximum amount of pension savings a person can build without paying tax - will now be completely abolished. It was previously £1,073,100.
This is for those with private pensions and the government hopes this move will stop 80% of NHS doctors from receiving a tax charge and therefore encouraging them to retire early.
He said: "I don't want any doctor to retire early because of the way taxes on pensions work. No one should be pushed out out of the work force for tax reasons."
Annual pension allowance
The annual pension allowance - the maximum amount of money an individual can pay into their pension in a tax year without a penalty - is also increasing. It currently stands at £40,000 but will be £60,000 for next year.
These rules are changing to encourage highly-paid professionals like doctors to stay working longer. The government hopes these changes will see them working longer or even coming out of retirement.
How are state pensions changing after the Budget?
The state pension is a monthly payment made by the government to people who have reached qualifying age and have paid enough National Insurance contributions.
The government already confirmed in the Autumn Budget that the state pension would increase to 10.1% in line with inflation.
Is the state pension retirement age changing?
If you were born between 6 October, 1954 and 5 April, 1960 you can start receiving your state pension from the age of 66.
For people born after this period, the state pension age is increasing to 67 by 2028 and then 68 by 2046.
