Utilising your pension is often a highly effective retirement investment method. Of course, owing to the occasionally mercurial nature of the financial world, there may be multiple changes to pension policy, including tax relief. This year, effective 6th April, there have been changes. The Spring 2023 budget has now made it easier to bolster your pension pot. You might be wondering: will the changes affect me?
NEW PENSION RULES EXPLAINED:
1. Lifetime Allowance:
This was the total amount that could be built up in your pensions without paying a tax charge. This has now been removed.
2. Pension Annual Allowance:
The maximum amount you can contribute to your pension yearly (while still receiving tax relief) has significantly increased. This is good news if you're looking to boost your pension. For most people, this is now £60,000 per tax year (increased from £40,000).
3. Tapered Annual Allowance:
Your annual allowance will reduce by £1 for every £2 of adjusted income over £260,000 (instead of £240,000). If you have an adjusted income of £360,000+, your annual allowance will be reduced to £10,000 (instead of reducing your annual income to £4,000 with an adjusted allowance of £312,000 as before). Now, fewer high earners will be impacted - and those impacted can pay in more each tax year across all their pensions.
4. Money Purchase Annual Allowance:
The MPAA has risen to £10,000. It benefits anyone looking to build their pension further after they've flexibly accessed a pension.
The article outlines just some of the things you could consider in relation to pension changes. It does not represent financial advice. If you would like personalised financial advice, please contact a financial adviser. Remember that the value of investments can fall as well as rise, and that past performance is not a guide to future performance.