Financial analyst Martin Lewis highlighted one “significant” change to pensions that the Chancellor did not mention in the Spring Budget.
Chancellor Jeremy Hunt announced pension changes in the Budget on Wednesday, including the removal of the lifetime allowance.
However, there was one change the chancellor did not mention in his speech to parliament, which is also aimed at encouraging older people to stay in work, Mr Lewis said.
The financial expert noted that in certain circumstances, people can put more money into their pension.
The government will increase the annual allowance from £40,000 to £60,000 from 6 April 2023, according to the budget document. Individuals can carry forward unused annual allowances from the previous three tax years. This is the maximum amount you can keep in your pension funds in the tax year (April 6 to April 5) before tax.
The Money Purchase Annual Allowance (MPAA), which replaces your annual allowance once you start collecting your pension, will also increase from £4,000 to £10,000 from 6 April, and the minimum reduced annual allowance from £4,000 to £10,000. 2023.
Mr Lewis said: “I think the biggest percentage change to pensions is probably what he hasn’t mentioned, which is the money purchase allowance going up from £4,000 a year to £10,000 a year. Now what this means is that it is the amount that is allowed to be paid in pension to people who receive pension money.
“At the moment the annual allowance is £40,000 and this is £4,000. So take any money out of your pension and suddenly you can only put £4,000 into it. But in future the annual allowance will be £60,000.
“Take any money from your pension, you’re allowed to put £10,000 a year in, which is enough for most people.”
Mr Lewis also outlined what he thought was the Chancellor’s reason for changing the allowance. He added: “Obviously, the changes to pensions are all about helping people who are thinking about not working – older people who are over fifty and thinking about not working, to encourage them to work.
“And I think the buy-in allowance for that money is going to be huge.”
Among the measures announced in the budget was a massive expansion of publicly funded child care aimed at boosting economic growth. Mr Hunt said he would add £11bn to the UK defense budget over the next five years.
He said the Office for Budget Responsibility (OBR) predicted Britain would no longer be in recession this year and that the government would “deliver on the Prime Minister’s priorities to halve inflation, reduce debt and deliver growth”.
The OBR expects UK inflation to fall to 2.9% by the end of 2023 from 10.7% in the final quarter of last year, despite “continued global volatility”, Mr Hunt said.