Updated: November 22nd 2023
The Autumn 2023 statement has been announced, and as always, there are changes for our clients that we need to consider.
Here at Reeves, we have taken a close look at the new budget and its impact on your financial and retirement planning. See our findings below.
Change:
National Insurance: Abolishing Class 2 contributions for self-employed people, reducing Class 4 contributions by 1%, reducing employee national insurance main rate to 10%
Relevant for:
Self-employed (sole traders)
Employed earners
Impact:
The average self-employed person will save £192pa from the class 2 NIC abolishment.
People struggling with cost of living (both employed and self-employed) will see an increase in their income after deductions for the year.
Reeves recommends:
For those who do not require this extra money in their pocket – we recommend looking at new regular savings options for retirement.
Change:
Commitment to the triple lock, meaning an extra £900 a year per person after April 2024.
Relevant for:
Clients already drawing their state pension.
Clients who have stopped working and are drawing an income from their pensions and savings.
Clients finalising their retirement plan before they stop work.
Impact:
All retirement plans will receive a much-welcomed boost, pushing retirement plans further towards the green than previously.
Lower pressure on people’s retirement savings at a time of market volatility.
Reeves recommends:
We encourage anyone who was concerned about their retirement plan being borderline achievable to book in today and examine the difference this state pension increase has made to your own forecast
No Change:
Income Tax Levels
Income tax levels remain at the current rates until 2027. A Tax by Stealth?
As clients receive their annual pay rises a greater portion will be moving into basic and higher tax bands.
The majority of clients will be experiencing an increased tax burden as a result of the inaction of income tax bands. This only serves to increase the argument for maximising savings into pension.
Some Change:
Isa Allowances
No change to the current ISA allowances however, greater flexibility does enhance the opportunities for clients.
Multiple subscriptions will be allowed in each tax year to ISAs of the same type. If a client has self-invested part of his current year’s allowance we now have the option of using the remainder.
Where an existing ISA account has receives no subscription in the previous tax year the requirement to make a fresh application will be removed.
Partial transfers of current year ISA subscriptions between providers will be allowed.
Harmonise the account opening age for any adult ISAs to 18. Previously Adult Cash Isa accounts could be opened from age 16.
To Be Advised :
Lifetime allowance
As announced in the Spring Budget, the lifetime allowance will be abolished from 6 April 2024 - the legislation for this will be in the Autumn Finance Bill.
The measures will clarify the taxation of lump sums and lump sum death benefits, and the application of protections, as well as the tax treatment for overseas pensions, transitional arrangements, and reporting requirements.
The maximum pension commencement lump sum for those without protections will be kept at 25% of the fund up to a maximum of £268,275 (25% of the lifetime allowance of £1,073,100). The figure of £268,275 will be frozen thereafter.
The lifetime allowance excess lump sums will effectively be charged at an individual’s marginal rate of income tax.
On death before age 75 beneficiary drawdown plans and beneficiary annuities will continue to be excluded from income tax, maintaining the current treatment.
To Be Confirmed… To account for benefits taken before 6 April 2024, a transitional calculation will be provided so individuals can calculate their available lump sum allowance and lump sum and death benefit allowance.
All of the above pension changes are moving closer to confirmed in pension legislation but be mindful that a change of government could well see proposals reversed or watered down.
In conclusion, this statement does not bring changes that are as significant as what we have seen in previous budgets but there are definitely new opportunities for people who are conscious of their retirement plan and we would love to speak to you about it.
At Reeves, our team of experts are always ready to help our clients navigate any changes to pensions and investments. If you have any questions regarding the impact of the budget on your pension, do not hesitate to contact our Advice Team.
Alternatively, if you are not yet a client of Reeves and have questions about the Budget and your pensions, you can book a free call with us to discuss how we can assist you in planning your retirement.
Our team will be happy to help you make the most of the changes and maximise your pension contributions.
The articles are for information only and should not be construed as advice or a recommendation. Please seek independent financial advice before taking any action. No action should be taken without independent professional financial advice as any actions on your pension may be irrevocable and have a big impact on your income in retirement.
Note that investments can go down as well as up and you may not get back the full capital invested.