Jeremy Hunt delivered his Autumn Statement yesterday and as always we are looking at how it affects the majority of our clients in pensions and investments.

Pensions

The big issue here was the confirmation that the Lifetime Allowance (LTA) would be abolished from April 6^th2024. This is the maximum amount of pensions savings we can have from all pensions and Hunt announced this at the Budget this year but this was confirmation that it would indeed be abolished. The latest maximum LTA was £1,073,200, so this will free up pensions savings above this figure. They have however, capped the tax free cash a 25% of the old LTA maximum of £1.073M. So, the maximum tax free cash will be capped at £268,300. If you have protection from previous regimes such as FP 16 you will still be allowed to take a higher tax free cash sum.

Also, for people who had exceeded the previous maximum pension pot or who had Fixed Protection, you can now start to pay into pensions again up to a maximum of £60,000 pa. However, before entering into any of this take expert advice as the devil is in the detail and you wouldn’t want to end up with an unnecessary tax charge.

Pensions Death Benefits

Currently if you die before 75 your remaining pension fund can be passed to a loved one and any money they take out of it is tax free. In the summer HMRC floated an idea of taxing this pot on death before age 75. However, Jeremy Hunt has rowed back on this and the death benefits remain as they are.

Namely, death under 75 benefits are tax free. Death after 75 the benefits are taxed as income in the hands of the recipients.

Again, can be complex but make sure your Death Benefit Nomination Forms are up to date to take advantage of this generous tax break.

State Pensions

Due to the triple lock and soaring inflation, State Pension is rising by 8.5% this year meaning that the basic figure will be c£11,500 pa.

Other Offerings

• National Insurance is dropping 2% for employees from 6^th January which is great news if you are still employed.
• Class 2 NIC’s are being abolished and is great news if you are self employed.
• They are tinkering around with ISA rules and will allow multiple ISA contributions to different ISA providers in the same tax year with an overall cap of £20,000. Not sure why this is coming in but will help a few people.
• Pension Pot for Life. This is an idea which if passed would give a legal right to employees to have their employer pension contribution paid into a pension of their choice. Then if they left employment they could take it with them and have the new employer pay into it. It sounds great in theory but would be a complete nightmare to administer so I would expect it does not see the light of day.

There were a few other issues around businesses and expensing investment and on the benefit system in general. Not a lot to get your teeth into with a General Election less than a year away who knows how much it will benefit us all.

One thing to say is inflation has fallen to 4.6%. This will then lead to interest rates starting to fall some time next year. When that happens, bond prices will rise rapidly so that the majority of investors will benefit as most portfolios have a good slug in bond funds. So, I would say hang on to your balanced and cautious portfolios as although they have struggled in recent times sunnier times are on the horizon.

As ever, speak to your adviser about these issues and how they affect you and how you can take advantage of them.

If I don’t speak to you before, have a great Christmas and New Year and let’s hope returns are much better next year than the last few.

Gary Cowley

Partner