Financial expert Martin Lewis highlighted an “important” change to pensions that was not mentioned by the finance minister in the spring budget.
Chancellor Jeremy Hunt announced changes to budget pensions on Wednesday, including scrapping the lifetime work allowance.
However, there was one change the chancellor did not mention in his speech to Parliament – which is also intended to encourage older people to continue working, according to Mr Lewis.
The financial expert noted that people in certain circumstances will be able to pump more money into their pensions.
According to the budget paper, the government will increase the annual allowance from £40,000 to £60,000 from 6 April 2023. Individuals will still be able to carry forward unused annual allowances from the previous three tax years. This is the most you can save in your retirement funds in the tax year (April 6 to April 5) before you have to pay taxes.
The Money Purchase Allowance Annuity (MPAA), which replaces your annual allowance after you have started to draw your pension pot, will also be increased from £4,000 to £10,000 and the minimum taper annual allowance from £4,000 to £10,000 From April 6, 2023.
Lewis said: “I think perhaps the most beneficial change in pensions is the one he didn’t mention, which is that the money-buying allowance goes from £4,000 a year to £10,000 a year. Now, what that means is, that’s how much these people are allowed who have already taken some of the pension money out by paying it into their pensions.
So the annual allowance is currently £40,000 and this one is £4,000. So take any money out of your pension and all of a sudden you can only put £4,000 into it. But in the future, the annual allowance is £60,000.
“Take any money out of your pension, you’re still allowed to put in £10,000 a year, which is enough for most people.”
Lewis also cited what he believes is the reason behind the Chancellor’s changes in provisions. He added: “And, of course, he says the changes to pensions are about helping people who are considering not working — older people in their 50s and over who are considering not working, and actually encouraging them to work.
“And I think that money-buying allowance would be great there.”
Among the measures announced in the budget is a major expansion of state-funded childcare, which is intended to boost economic growth. Hunt also revealed that he would add £11 billion to the UK defense budget in the next five years.
He said the Office for Budget Responsibility (OBR) now forecasts that the UK will not enter a technical recession this year and that the government will “meet the prime minister’s priorities of halving inflation, reducing debt and reviving the economy”.
Hunt said that despite continued global instability, the Balance Sheet expects UK inflation to fall from 10.7% in the fourth quarter of last year to 2.9% by the end of 2023.
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