Sweeping pension changes dominated the headlines following the government’s Spring Budget earlier this month. But while those changes should be positive, it may be worth waiting until they become law before making any changes to your retirement plan.
As we reported at the time, the Budget proposed scrapping the lifetime allowance and raising the annual allowance – the amount you may be able to put into your pension each year without paying a tax charge (more details below).
The changes will now need to pass into law and, like any legislation, go through the parliamentary process. The government has published its Spring Finance Bill 2023 outlining the detail, and said its pension changes will come into effect from 6 April.
But Tina Turner, Chartered Financial Planner at Coutts, while welcoming the changes, advised caution.
“We’re recommending that clients avoid any knee-jerk reactions and take advice from a qualified, authorised pension adviser before making any changes based on what came out of the Budget,” she said. “The proposals could indeed be very positive for some, but there are still areas where we need more finite detail, so we can support our clients in what can be a complex area.
“At this point in time, people should only rely on the pension rules and laws as they currently stand, not on what’s expected in the future, until the details are confirmed.”
Coutts’ wealth structuring specialist Irene Wolstenholme agreed, saying that, while it would be a surprise if any of the Budget proposals didn’t pass into law, it wasn’t impossible.
She added that there may be political elements to consider as well.
“Pretty much as soon as the Chancellor sat down in the House of Commons after announcing the Budget last week, Labour said they would reverse the changes if they got into power,” she said.
“So whether you want to take full advantage while you can, or not bother because it might not last, it’s worth keeping in mind that these new pension rules could change again in the future. Again, it’s always best to take advice.”
Regardless of the recent Budget announcements, one thing you might want to consider, if you haven’t already, is bringing all your pensions together under one roof.
Move them to one online platform like Coutts Invest and your retirement fund could become much easier to monitor and manage – whatever the tax allowances available to you. It could mean lower administrative fees too. It’s easy to set up, and you get to choose one of five funds to invest in based on your preferred investment approach.
However, it’s worth noting that there could be reasons to keep your pensions where they are – for example, some pension schemes will have high exit charges. When in doubt, seek financial advice.
The value of investments can fall as well as rise and you may not recover the amount of your original investment.