MILLIONS of pensioners are set to be affected by major changes announced in today’s Spring Budget.
The Chancellor has revealed the series of moves as part of his financial plan for the year.
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Some of the changes have already been announced in last November’s Autumn Statement but several are new revelations revealed for the first time today.
Much of today’s speech was focused on keeping people in work for longer in a bid to boost the economy.
It’s good news for those looking to retire in the near future too as some payments are going up.
Here are all the pension changes set to hit retirees but if you want to understand how today’s announcement might affect you, use our handy tool for more info.
Spring Budget at a glance
Tom Selby, head of retirement policy at AJ Bell, said: “Jeremy Hunt has unveiled a pensions tax-cutting bonanza far beyond anyone’s pre-Budget expectations and the most significant retirement policy intervention since the 2015 ‘pension freedoms’.
“Taken together, these pension tax cutting measures amount to a colossal boost to savers and retirees and send a clear message to hard-working savers that the government is now firmly on your side.”
Pension lifetime allowance
The Chancellor has scrapped the lifetime allowance (LTA) on pension savings in an effort to keep people in work.
Around 2million middle-class Brits will benefit from the complete scrapping of the £1million lifetime allowance.
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The move is specifically targeted at doctors who leave the NHS early to avoid being trapped by taxes on their savings.
Mr Hunt said: “These changes will stop over 80% of NHS doctors from receiving a tax charge, incentivise our most experienced and productive workers to stay in work for longer and simplify our tax system.”
This will allow workers to put more money into their pension pot before being taxed.
The lifetime allowance is the total amount you can save tax into a pension scheme.
In other words, it’s the maximum amount you can save into all of your pensions combined without incurring a potentially hefty tax charge.
Annual allowance increase
In today’s Budget Mr Hunt also revealed a £20,000 increase to the annual allowance rate for pensions.
This caps the amount you can save into your private pension scheme in a tax year.
The amount each person can save each year before incurring tax has been hiked from £40,000 to £60,000.
State pension boost
Revealed in the Autumn Statement last year, Mr Hunt confirmed that pensions would rise in line with September’s inflation rate of 10.1%.
The move will mean that millions of pensioners will get an £870 rise in their state pension payments.
This means that the full state pension rate of £185.15 per week will increase by £18.70.
It means pensioners would get a total of £10,600 a year.
While the basic state pension will go up £14.35 from £141.85 per week to £156.20.
Over the year, that will be an increase of £746.20 to £8,122.40 in total.
Benefits including Universal Credit and Child Benefit, will be increasing by last September’s inflation rate of 10.1%, as well as State Pension too.
Pension credit increase
Pension Credit is paid to those who have reached state pension age and are on a low income.
The benefit is intended to top people up so they can afford everyday living costs.
It too will be rising in line with September’s inflation rate in April, so it’s important you don’t miss out.
From next month Pension Credit will rise to £201.05 a week for a single claimants, and £306.85 a week for couples.
The average Pension Credit award is worth over £3,500 a year, according to the Department for Work and Pensions.
You can start your application up to four months before you reach state pension age.
Applications for pension credit can be made on the government website or by ringing the pension credit claim line on 0800 99 1234.
To keep up to date with the latest announcements from today’s Spring Budget, follow our live coverage.
The Chancellor also announced a second cost of living payment for pensioners during the Autumn Statement last year.
The £300 payment will specifically go to Brits who are over the state pension age – those born on or before September 25, 1956.
Meanwhile, Jeremy Hunt has also revealed that the Energy Price Guarantee will stay at £2,500 for the average household until July.
Plus, millions more parents will get 30 hours free childcare in a bid to get people back to work.
Money Purchase Annual Allowance
The Money Purchase Annual Allowance will go up from £4,000 to £10,000 in April 2023 too.
This is the amount you’re able to put into your pension once you’ve already taken some from it.
This will come into effect from April 6.
What is the Budget?
The Budget is when the Government outlines its plans for tax hikes, cuts and things like changes to Universal Credit and the minimum wage.
It’s different to the Spending Review, which sets out how much public cash will go towards funding certain departments, devolved governments and services, such as the NHS.
The Budget is read out in the House of Commons by the Chancellor of the Exchequer.
It will be Jeremy Hunt’s first Spring Budget as Chancellor.
It will be the first full Budget since last year, following the mini-Budget in September and the Autumn Statement in November.
Mr Hunt has told Tories he will “put meat on the bones” of the PM’s plan to fix the economy.
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