There are four major changes to pensions that were outlined in the Chancellor's Spring Statement, which could affect you in the year ahead.
Auto-enrolment contributions on the rise
Employees and employers have had to contribute minimum amounts into employee pension policies since the beginning of the auto enrolment scheme.
Contributions must be at least 2% currently (half employer and half employee) up to £46,350. From April this year, this will rise to 5%, (3% from the employee and 2% from the employer). In April 2019, the total level of contribution will reach 8%.
Lifetime allowance finally goes up
The lifetime allowance will increase by £30,000 up from the £1 million it is at the moment. This is still far below what it was in 2006, when it was introduced, at £1.5 million. The increase is designed to move with inflation, rather than being an actual increase over and above the level of inflation.
Dividend tax allowance cut
The tax free allowance for dividends will fall from £5,000 to £2,000, hitting business owners that use dividends as part of their own pay packages as well as those with particularly large dividend paying share portfolios.
State pensions to rise
The state pension will rise to £164.35 per week, while those who attained state pension age prior to the 6th of April 2016 will also see an increase, but to the lower level of £125.95.
Contact Westminster Wealth Management today and one of our skilled advisers can construct a financial plan for you that will enable you to meet your financial goals.
Information is based on our current understanding of taxation legislation and regulations which is subject to change.
A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation.
Four pension shake-ups set to come into force next month