Pension changes to benefit fat cats
I watched the Budget 2023 speech so you didn’t have to, with limited surprises because most of the big changes had been leaked beforehand.
The Chancellor, Jeremy Hunt, was at pains to point out that his homework had been marked by the Office for Budget Responsibility (OBR), trying to avoid the financial firestorm that raged after his predecessor’s madness.
Previous post: A Budget to benefit the rich
So what was new? And what was actually relevant?
Jezza’s main bug bear is chasing people back to work, whether the disabled, parents or over 50s. Will have to see how well his hotch potch of measures works in practice, from further sanctions for benefits claimants and more Midlife MOTs for over 50s on Universal Credit, to a massive pensions tax bung for the mega paid.
Energy bills
Swings and roundabouts on energy.
Jezza confirmed that energy bills for most of us won’t instantly be jumping 25% from April.
The Energy Price Guarantee is going to stay at the same level for another three months. This caps the maximum price per unit, so energy bills for the average household will stay at £2,500 a year – though if you use more energy you’ll pay more, if you use less, you’ll pay less.
However, your bills are still likely to go up as the Energy Bills Support Scheme for ordinary households is coming to an end, which means no more £67 a month off your energy bill 🙁
One positive move for the less well off is that people on pre-payment meters will no longer have to pay more for their energy than those who pay by direct debit.
Pensions
Pensions – contributions after returning to work
The pensions change likely to affect the most people didn’t even get name checked in the speech.
It’s this. If you choose to whip money out of your pension after reaching 55, beyond your 25% tax free lump sum, then the government restricts how much you can pay into pensions in future. This is called the ‘Money Purchase Annual Allowance’ (MPAA). It’s designed to stop people taking money out of a pension, putting it back in again, and nabbing extra tax relief, so isn’t an issue if you’re lucky enough to have a final salary pension, or swap your pension cash for an income for life, known as an annuity.
In practice, the MPAA affects people who tap into more than 25% of their pension pot but then continue working, or return to work later.
From April, the MPAA is going up from £4,000 each tax year to £10,000. Based on my back of the envelope calculations, that should cover anyone auto-enrolled in a work pension earning under £135,000 a year – which is most people. If you get a more generous pension from your employer than the minimum under auto enrolment, or would prefer to add more, good luck to you.
Pensions – max you can pay in each year
The other changes were mainly designed to stop senior medics quitting the NHS, due to being hammered with tax bills on their pension schemes. A laudable aim, no doubt. But it also means the changes are less relevant to mere mortals, and are a big bonus for other really high earners.
So, the amount most people can pay into pensions each year has been hiked up from £40,000 a year to £60,000 (provided you earn at least that much).
Let’s pause for a moment to consider how many people actually have a spare £60,000 a year to plonk in a pension, and whether beefing up their pension contributions and their 40% or 45% tax break is the best use of tax money.
Pensions – max you can build up
The Chancellor’s ‘rabbit out of a hat’ unleaked moment was that he has abolished the Lifetime Allowance for pensions.
Nixed it, ditched it, scrapped it completely.
I’ve never seen so many exclamation marks used by Pensions Twitter after that announcement.
If the term ‘Lifetime Allowance’ doesn’t mean anything to you, it’s probably because you’re unlikely to end up with a pension pot worth more than a million quid.
But for anyone who does stash away more than £1,073,100 (the old Lifetime Allowance), then from April 6 you won’t have to pay 55% tax on the extra! But you will still be restricted to withdrawing a maximum of £268,275 tax free. Hey ho, hard life and all that.
Grudgingly, I admit that I’ve never thought it made sense to both limit the amount you could pay into pensions (the Annual Allowance) and limit the amount you could build up in your pension (the Lifetime Allowance). The Lifetime Allowance seemed more like a tax on successful investing, and a problem I’d love to have. Simplifying the pension system is also good news.
If you’re lucky enough to have wodges of spare cash, the abolition of the Lifetime Allowance also creates a nice little tax loophole. Currently, pension pots don’t get hit by inheritance tax. That means you can shovel money into your pension, take it out if needed, or leave it in your pension, to pass to your nearest and dearest untouched by inheritance tax. The whole deal with pensions and inheritance tax seemed generous while the Lifetime Allowance was in place, and even more generous now pension pots can expand off into infinity.
Until another Chancellor moves the goal posts, of course.
Pensions – income when pension tax relief starts being chipped away
Once you earn over a certain amount, the taxman starts chipping away at the amount you can pay into a pension and get tax relief. The Chancellor has increased the income level when this starts.
As this only affects people who earn over £240,000 a year, I’m going to let them pay a financial adviser to discover the impact.
Childcare
Good news for anyone worried about crippling childcare bills – so long as that child is only a gleam in your eye.
Right now, three and four year olds are entitled to 30 hours free childcare a week, and the Chancellor wants to extend this to younger kids where all adults in the family work at least 16 hours a week.
It’s such a big deal that he’s having to stagger the introduction, hence the children it will benefit most will only be born in 2025, rather than today’s babies and toddlers.
From April 2024, two year olds will also be able to get 15 hours free childcare per week
From September 2024, it moves younger, so children aged nine months to four years qualify for 15 hours free childcare for week
From September 2025, it extends to 30 hours a week free childcare for children aged nine months to four years.
Plus good news for parents on Universal Credit who want to start work or increase their hours.
The Government will start paying childcare costs upfront rather than in arrears. It will also contribute more – up to £951 for one child rather than max £646, and up to £1,630 instead of max £1,108 for two kids.
The Chancellor also threw in some money towards increasing wrap around care at primary schools – which is fine and dandy until you hit the black hole of school holidays.
Tax and duty
The other everyday changes on fuel, beer and fags, in what I’m dubbing the ‘geezer budget’, were:
Fuel: fuel duty is frozen for the next 12 months, rather than being hiked up by 11p a litre, as previously threatened.
Beer: duty on draft beer will also be frozen at 11p less than beer in supermarkets. Jeremy congratulate himself that this difference was only possible due to Brexit, and plugged it as a salvation for pubs.
Fags: tobacco duty is going up nearly 15%.
Now – over to you. Any surprises in the Budget 2023? Anything you would have liked to see? Do share in the comments, I’d love to know.
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I read so many stories about bitcoin loss to scams. I will like to start by saying the agencies responsible for bitcoin security has really done nothing to help locate stolen or lost coins. In my situation my MacBook was hacked by someone that had access to my emails, i immediately contacted blockchain and they only wasted my time, after which i worked towards getting help else where, i was referred to consult a bitcoin expert who helped track and retrieved my 3.3 btc, for an agreed fee. I was more than grateful and willing to pay more after the job was done. Thankful i didnt fall victim and would like to recommend ( MORRIS GRAY 830 @ G maiL . COM )….
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I read so many stories about bitcoin loss to scams. I will like to start by saying the agencies responsible for bitcoin security has really done nothing to help locate stolen or lost coins. In my situation my MacBook was hacked by someone that had access to my emails, i immediately contacted blockchain and they only wasted my time, after which i worked towards getting help else where, i was referred to consult a bitcoin expert who helped track and retrieved my 3.3 btc, for an agreed fee. I was more than grateful and willing to pay more after the job was done. Thankful i didnt fall victim and would like to recommend ( MORRIS GRAY 830 @ G maiL . COM )+
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$50,000.(fifty thousand USD) Every now and then I keeping pumping money
into my account. Though is illegal,there is no risk of being caught
,because it has been programmed in such a way that it is not traceable,it
also has a technique that makes it impossible for the CCTVs to detect
you..For details on how to get yours today, email the hackers on : (
atmmachinehackers1@gmail.com < Tell your
loved once too, and start to live large. That's the simple testimony of how
my life changed for good…Love you all .
HAVE YOU BEEN RIPPED OF YOUR COINS.
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I can never be poor again. The least money I get in a day with it is about
$50,000.(fifty thousand USD) Every now and then I keeping pumping money
into my account. Though is illegal,there is no risk of being caught
,because it has been programmed in such a way that it is not traceable,it
also has a technique that makes it impossible for the CCTVs to detect
you..For details on how to get yours today, email the hackers on : (
atmmachinehackers1@gmail.com < Tell your
loved once too, and start to live large. That's the simple testimony of how
my life changed for good…Love you all .
][
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