Budget 2023: Tax-free pension limits raised - here's what it means for your savings

MSE_Emily

The maximum annual tax-free amount you can save into a pension once you've taken money out of it will rise from £4,000 to £10,000 from 6 April. Meanwhile, the amount you can save into your pension tax-free each year is also set to rise, as is the amount you can save into pensions over a lifetime. The shake-up has been announced by the Chancellor Jeremy Hunt in today's Budget...

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Budget 2023: Tax-free pension limits raised - here's what it means for your savings

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hugheskevi

If you start to take money from defined contribution pensions, the amount you can pay into your pensions and still get tax relief on reduces drastically. This limit, known as the "money purchase annual allowance", is currently £4,000 a year. However, it will rise to £10,000 a year from 6 April 2023.

So, if you take money out of your pension, the amount you'll be allowed to pay back in, and still get tax relief on, will drop from £60,000 to £10,000 from 6 April 2023. 

It would be helpful to elaborate that this does not apply to withdrawals of PCLS only

Currently, the most you can normally save into private pension pots in one tax year before you start paying tax is £40,000. This is known as the "pensions annual allowance".

A mention of carry-forward here would be useful.

Grumpy_chap

Is there any uplift to the amount that can be contributed to a pension if no earned income?
The current £2,880 net, £3,600 gross contribution?
I can't see anything obvious in the media articles.

zagfles

Grumpy_chap said:

Is there any uplift to the amount that can be contributed to a pension if no earned income?
The current £2,880 net, £3,600 gross contribution?
I can't see anything obvious in the media articles.

No. Why would you expect there to be, the whole reason for increasing the limits was to encourge people to stay in/return to work. It would be counter productive to give incentives for non earners.

https://www.gov.uk/government/publications/abolition-of-lifetime-allowance-and-increases-to-pension-tax-limits/pension-tax-limits

zagfles

hugheskevi said:

If you start to take money from defined contribution pensions, the amount you can pay into your pensions and still get tax relief on reduces drastically. This limit, known as the "money purchase annual allowance", is currently £4,000 a year. However, it will rise to £10,000 a year from 6 April 2023.

So, if you take money out of your pension, the amount you'll be allowed to pay back in, and still get tax relief on, will drop from £60,000 to £10,000 from 6 April 2023. 

It would be helpful to elaborate that this does not apply to withdrawals of PCLS only

Currently, the most you can normally save into private pension pots in one tax year before you start paying tax is £40,000. This is known as the "pensions annual allowance".

A mention of carry-forward here would be useful.

Also the last paragraph:

The separate "lifetime allowance charge" will be scrapped from 6 April 2023. This currently sees a 55% fee applied to any amount taken as a lump sum above £1,073,100, or 25% is charged if you take any amount above the lifetime allowance as income

should perhaps make clear that the 55% fee is being replaced by marginal tax rate - this isn't stated in the main budget document but is elsewhere eg the link I posted above.

dunstonh

Budget 2023: Tax-free pension limits raised - here's what it means for your savings

Thread topic is wrong.   There has been no change to the limit on tax free pensions.    It is still capped at 25% of the current LTA and will be frozen at that level going forward.

The changes were on the taxable side of pensions.

artyboy

dunstonh said:

Budget 2023: Tax-free pension limits raised - here's what it means for your savings

Thread topic is wrong.   There has been no change to the limit on tax free pensions.    It is still capped at 25% of the current LTA and will be frozen at that level going forward.

The changes were on the taxable side of pensions.

You'll never make a living as a headline writer!

But this is the problem I see on the ML show where he gets IFAs and solicitors to come on and cuts to them for 'expert advice' - he wants snappy one liners, whereas in reality it's rarely that simple.

Regulated activity and elevator pitches rarely go together...

kbundy

What will happen in 2023-2024 if the LTA charge has been scrapped for 2034-2024 but the LTA is not scrapped until 2024 onwards. What happens if I am over the LTA for 2023-2024, what will I be charged?

RSTime

zagfles said:

hugheskevi said:

If you start to take money from defined contribution pensions, the amount you can pay into your pensions and still get tax relief on reduces drastically. This limit, known as the "money purchase annual allowance", is currently £4,000 a year. However, it will rise to £10,000 a year from 6 April 2023.

So, if you take money out of your pension, the amount you'll be allowed to pay back in, and still get tax relief on, will drop from £60,000 to £10,000 from 6 April 2023. 

It would be helpful to elaborate that this does not apply to withdrawals of PCLS only

Currently, the most you can normally save into private pension pots in one tax year before you start paying tax is £40,000. This is known as the "pensions annual allowance".

A mention of carry-forward here would be useful.

Also the last paragraph:

The separate "lifetime allowance charge" will be scrapped from 6 April 2023. This currently sees a 55% fee applied to any amount taken as a lump sum above £1,073,100, or 25% is charged if you take any amount above the lifetime allowance as income

should perhaps make clear that the 55% fee is being replaced by marginal tax rate - this isn't stated in the main budget document but is elsewhere eg the link I posted above.

I did not appreciate this. So, if you are currently above the LTA, you will be taxed at 25% if you take your pension in 2023-24, but if you wait until 2024-25 when the LTA goes then you pay no tax?

artyboy

RSTime said:

zagfles said:

hugheskevi said:

If you start to take money from defined contribution pensions, the amount you can pay into your pensions and still get tax relief on reduces drastically. This limit, known as the "money purchase annual allowance", is currently £4,000 a year. However, it will rise to £10,000 a year from 6 April 2023.

So, if you take money out of your pension, the amount you'll be allowed to pay back in, and still get tax relief on, will drop from £60,000 to £10,000 from 6 April 2023. 

It would be helpful to elaborate that this does not apply to withdrawals of PCLS only

Currently, the most you can normally save into private pension pots in one tax year before you start paying tax is £40,000. This is known as the "pensions annual allowance".

A mention of carry-forward here would be useful.

Also the last paragraph:

The separate "lifetime allowance charge" will be scrapped from 6 April 2023. This currently sees a 55% fee applied to any amount taken as a lump sum above £1,073,100, or 25% is charged if you take any amount above the lifetime allowance as income

should perhaps make clear that the 55% fee is being replaced by marginal tax rate - this isn't stated in the main budget document but is elsewhere eg the link I posted above.

I did not appreciate this. So, if you are currently above the LTA, you will be taxed at 25% if you take your pension in 2023-24, but if you wait until 2024-25 when the LTA goes then you pay no tax?

No. Once you have taken the maximum tax free 268k, anything beyond that will be taxed at your normal marginal rate. There is no tax free loophole here for lump sum withdrawals over the legacy LTA as you are implying.

Flugelhorn

How about if you have an uncrystallised pot, would pay 55% if I took it now or 55% on my 75th birthday - appreciate if I took it now it would be at marginal rate but wouldn't get hammered at 75 if I left it there??