19 Mar Budget 2021: the key pension-related changes
In the 2021 Budget, Chancellor Rishi Sunak announced that the state pension is rising by 2.5 per cent for the 2021-22 tax year, creating an increase of £228.80 per annum for individuals receiving a full new state pension.
The 2.5 per cent increase begins on 6 April 2021, and recipients who are eligible for the full amount of the new single-tier state pension will receive almost £4 more each week, from £175.20 to £179.60.
Additionally, the pensions Lifetime Allowance (LTA), the total amount you can accrue within private pensions without incurring a substantial tax charge, will freeze at £1,073,100 until April 2026.
Throughout your working life, you can save as much as you want into your pension [*]. But, if it exceeds the LTA, you may be hit with a lot of tax when you access the money or at certain other points.
According to research, around 10,000 pension savers will exceed the limit, possibly having a tax charge of 25 per cent, which will create nearly £990 million for the Treasury.
Pension tax relief
However, Sunak did maintain the key pension tax relief system, despite the speculations circling pre-Budget that the Government was to make it less generous.
At Howard Worth Financial Services, we advise business owners and individuals on pension-related issues, such as lifetime allowances and pension schemes, so that they can retire in confidence. For more information, contact our experts today.
[*]Tax-relievable personal contributions are limited to 100 per cent earnings (or £3,600pa if more). And the annual allowance applies to contributions from all sources – and if exceeded the AA tax charge applies.