In a bid to encourage early retirees back to work, chancellor Jeremy Hunt unveiled several changes to pension allowances during the Budget. The announcements could mean you’re able to save more in your pension and boost your retirement income. 

Here are the four key pension changes Hunt announced. 

1. The Lifetime Allowance will be abolished 

Previously, the Lifetime Allowance (LTA) has limited the amount of pension benefits you could tax-efficiently build up in total. Those that exceeded the allowance could face an additional tax charge when they accessed their savings. In the 2022/23 tax year, the LTA was £1,073,100. 

It meant that some savers stopped pension contributions or even retired early because they didn’t want to cross the threshold. 

For the 2023/24 tax year, the charge for exceeding the LTA has changed to 0%, and it’s expected the government will abolish the LTA in April 2024. So, if you were nearing the LTA threshold, you could add more to your pension without worrying about paying more tax. 

2. The Annual Allowance has increased to £60,000

While the government is scrapping the LTA, the Annual Allowance will remain in place. However, the maximum amount you can save into a pension tax-efficiently each tax year will rise from £40,000 to £60,000. 

This means you can place up to £60,000 (or 100% of your annual earnings) and receive tax relief on your contributions. Tax relief is given at the highest rate of Income Tax you pay, so it could provide a welcome boost to your retirement savings. 

As a result, it’s worth reviewing your current pension contributions and calculating if increasing them could make sense for your financial plan. 

3. The Money Purchase Annual Allowance is now £10,000

If you’ve flexibly accessed your defined contribution (DC) pension, you may be affected by the Money Purchase Annual Allowance (MPAA). 

The MPAA reduces how much you can tax-efficiently save into your pension. As retirement has become more flexible, the MPAA is affecting more people. It may affect workers who use their pension to create an income during a career break and then return to work, or those that have semi-retired and want to continue adding to their pension.

During the Budget, Hunt announced the MPAA would rise from £4,000 to £10,000. So, if you’ve taken an income from your pension, you may now be able to save more tax-efficiently.  

4. The amount high earners can tax-efficiently save has increased 

The amount high earners can tax-efficiently save into their pension is affected by the Tapered Annual Allowance. This allowance has now increased from £4,000 to £10,000. 

The “threshold income” for the Tapered Annual Allowance has also increased from £240,000 to £260,000. 

The amount you could tax-efficiently save into a pension falls by £1 for every £2 your income exceeds the threshold for the Tapered Annual Allowance. It can fall by a maximum of £50,000 to £10,000.

The changes mean that high earners will now be able to contribute more to their pension tax-efficiently, and some may no longer be affected by the Tapered Annual Allowance.  

Should you increase your pension contributions in 2023/24? 

The changes announced in the Budget mean many workers could tax-efficiently contribute more to their pension in 2023/24. So, should you increase your contributions?

There are many reasons why adding more to your pension makes sense. It’s a way to invest in your future and could mean you enjoy a more comfortable retirement. As you could receive tax relief on your contributions and investment returns are free from Capital Gains Tax, a pension could be a valuable way to invest for the long term.

However, you should keep in mind that pension contributions aren’t usually accessible until you are 55, rising to 57 in 2028. As a result, you couldn’t make a withdrawal to cover emergencies or other outgoings before you reach retirement age. 

If you are thinking about increasing your pension contributions, you should review your wider financial plan to balance short- and long-term goals. 

Contact us to create a tailored financial plan

A tailored financial plan could help you reach your retirement goals, whether you’re close to the milestone or it’s still years away. Please contact us to arrange a meeting and discuss what steps you could take to get on track for the retirement you want.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results. 

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.  

Investors should expect further volatility in the markets in 2023, experts suggest.

Economies around the world are facing recession due to factors including high inflation and rising interest rates. The International Monetary Fund’s Kristalina Georgieva predicts that a third of the global economy will be in recession this year.

The World Bank also has a similar outlook, as it cut its global growth forecast from 3% to 1.7% after risks identified six months ago materialised. The organisation warned that fresh setbacks could lead to the second global recession in three years.

As an investor, remember that volatility in the markets is normal. Take a long-term view of your portfolio’s performance and focus on your overall goals rather than short-term market movements. 

Here are some of the factors that affected markets in January 2023. 

UK

There was a positive sign that the UK could avoid the long recession that some experts have predicted – the economy grew by 0.1% in November. 

The UK inflation rate also dipped slightly to 10.5% in the 12 months to December. It suggests that inflation is starting to ease, but it’s still far higher than the Bank of England’s (BoE) target of 2%.

However, the BoE’s chief economist Huw Pill warned that the UK could face persistent challenges if domestically generated inflation gained momentum. For example, if firms try to maintain real profit margins, it could prolong the high inflation environment. 

High energy prices in particular continue to be a challenge for both households and businesses.

Chancellor Jeremy Hunt will slash the current energy support scheme for businesses in March. He told business leaders that the current scheme is “unsustainably expensive”.

Trade body MakeUK, which represents around 20,000 manufacturers, criticised the news. It warned that two-thirds of businesses expect to cut production or jobs as a result of energy prices. 

The UK government’s borrowing reached a record high in December, which highlights the cost of the energy support scheme. The government borrowed £27.4 billion, the highest amount recorded since records began in 1993. The high figure was linked to the cost of energy and interest rates rising.

The figure was £9.8 billion more than the Office for Budget Responsibility forecast, potentially leaving little room for Hunt to cut taxes in the upcoming spring Budget.  

According to the Office for National Statistics (ONS), industrial action also affected firms, with a quarter of businesses said they were unable to obtain the necessary goods for their operations during the month. 

The ONS data suggests that some businesses plan to make cuts to their staff in the next three months. 5% say they could make redundancies, while two-thirds plan to take action to cut staff costs. Yet, the figures also show that a third of businesses are experiencing a shortage of workers. 

Readings from the S&P Global Purchasing Managers’ Index (PMI) indicate that sectors are struggling. A reading below 50 indicates contraction. 

• The manufacturing sector ended 2022 in a downturn, with a reading of 45.3. It’s the fifth consecutive month of decline.
• A fall in new orders affected the service sector, but only marginally, with a reading of 49.4. 

The ONS has warned that some households could face a significant rise in their outgoings. In 2023, 1.4 million fixed-rate mortgage deals will end, and many of them have an interest rate below 2%. As interest rates climbed throughout 2022, this means homeowners could face a much larger mortgage bill than they expect when their current deal ends. 

Figures from the BoE also show that consumers are borrowing more to cope with the rising cost of living. £1.5 billion was borrowed in November. Most of this, around £1.2 billion, was on credit cards and was the highest figure recorded since 2004. 

Europe

Inflation in Europe could be stabilising. In Germany, the figure for the 12 months to December 2022 fell to 8.6% from 10% a month earlier. However, food prices (20.7%) and energy costs (24.4%) are still much higher than a year ago. 

The PMI data suggests the construction sector in the eurozone is suffering a “sustained contraction” after the reading fell to 42.6. All three of the largest economies the survey covers in the eurozone – Germany, France, and Italy – suffered a drop.

Total output is still in the contraction territory, but it is easing with a reading of 49.3, and the service sector moved back into growth with a reading of 50.2. 

While still challenging, the pressure easing is reflected in a survey from the Ifo Institute. It found that German business morale is up as the economic outlook improves. 

Unemployment figures from the eurozone also indicate that businesses are feeling confident about their prospects. Eurostat reported that unemployment remained at a record low of 6.5% in November. 

US

There are positive signs for the US economy – inflation fell and the number of jobs increased. 

In the 12 months to December 2022, US inflation fell to 6.5%. It indicates that the cost of living pressures are starting to ease. 

The US job market ended 2022 on a high. The Department of Labor reported that 223,000 jobs were added to the economy at the end of the year. Unemployment also fell to 3.5%, taking it to its pre-pandemic low.

Yet, some businesses are still struggling. The PMI for the factory sector suggests it suffered its fastest rate of decline since May 2020, with a reading of 46.2. 

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Estate planning is an important part of your financial plan. Not only does it ensure your assets are passed on to who you wish and considers areas like Inheritance Tax (IHT), but it could provide you with peace of mind about your future too.

Over the last few months, you’ve read about why estate planning matters, how to decide who to pass on assets to, and when you need to create a plan for IHT. Now, read on to find out what steps you could take to improve your own financial security in your later years.

While these three areas can be difficult to think about, they could safeguard your future. 

1. Create a care plan

There are many reasons why someone may need care or additional support in later life, and it can take many different forms. Carehome estimates that almost half a million people live in care homes in the UK. Others may have care services provided in their home.

A care plan can help you set out what your preferences would be. For example, would you want to remain in your own home if possible? Is there a care home you’d prefer because of the facilities it provides or the location means it’s accessible for your family?

In many cases, if you need support, you will be liable to pay for at least a proportion of the costs. So, creating a care plan should also include how you would pay for care. 

Carehome research suggests the average weekly cost of living in a residential care home is £760. This rises to £960 a week for a nursing home. The cost can vary significantly between care homes, so taking time to understand potential costs in your area is a must. 

With an idea of the potential cost of care, you can earmark some of your assets to pay for it. Of course, you may not need to use your care fund at all but knowing that it’s there can provide peace of mind. 

2. Name a Lasting Power of Attorney 

If you were unable to make decisions, who would you want to make them on your behalf?

A Lasting Power of Attorney (LPA) gives someone you trust the ability to make decisions for you if you can’t due to an accident or illness. There are two types of LPA: the first covers health and care, and the second finances and property. 

Even if you are married or in a civil partnership, your partner does not have the automatic right to make decisions for you. In fact, they could be locked out of financial accounts, including joint accounts, if you could not make decisions and they are not your LPA. 

If you cannot make decisions and you don’t have an LPA, your loved ones may not be able to manage your affairs. They would have to apply to the courts to appoint someone to act on your behalf. This can be costly and time-consuming, and the courts may not choose the person you’d prefer to act for you. It’s a process that could leave you in a vulnerable position and be stressful for your loved ones. 

Despite the importance of an LPA, research suggests it’s something many people overlook; according to Scottish Widows, only 37% of Brits have an LPA in place. 

3. Make funeral arrangements 

Thinking about passing away can be difficult, but it could ensure your wishes are carried out. It can also give your loved ones welcome guidance at a time when they’re grieving.

The cost of a funeral may also be something you consider. According to MoneyHelper, the average cost of a burial is £4,383 while the average cremation costs £3,290. 

There are several different ways you could make funeral arrangements.

When writing a will, you could set out your preferences. This would not be legally binding, but your family may find it useful to understand what you’d prefer. 

You may also choose to arrange and pay for your funeral while you’re still alive. This means you’d have control over the arrangements and your family doesn’t need to consider how to cover the costs. 

Contact us to create an estate plan you can have confidence in

An estate plan should give you confidence about your future and what will happen when you pass away. We can work with you to create a plan that reflects your wishes and circumstances. Please contact us to arrange a meeting. 

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate estate or tax planning. 

Given that energy prices have soared, it’s not surprising that energy efficiency measures have become essential to homeowners. However, a survey found some trends that you might not expect, and it could change how you view your property if you’re thinking about updating it. 

According to Halifax, almost half of homeowners want to make improvements to their property within the next few years. So, what should you focus on?  

According to 62% of people, a good Wi-Fi connection is essential. It’s easy to see why this would be important. Whether you’re working from home, enjoying streaming a TV show, or connecting with family and friends, you’ll often be using the internet.  

Another unsurprising must-have is energy efficiency measures, which 58% of people said were crucial. Over the last year, household energy bills have soared for many families. So, cost-cutting measures, like insulation, energy-efficient appliances, or renewable energy sources could save money in the long run. 

Considering energy efficiency could also make your home more attractive if you want to sell it in the future. 

Separate research from Legal & General suggests that potential buyers would be willing to pay a premium of up to 10.5% for a low-carbon home. Demand is growing too; searches for mortgages that consider the Energy Performance Certificate (EPC) rating, which measures a property’s energy efficiency, increased by 34% in July 2022. 

So, while energy-efficient measures can be costly to install initially, they could pay you back through lower energy bills and potentially a higher sale price. 

Making spaces functional with a utility room (40%) and study space (27%) has also become more popular. If you’re thinking about updating the layout of your home or how you use different rooms, giving each space a designated purpose could be useful. 

5 upcoming trends that could make your property more attractive 

As well as the must-haves you’d expect to find in a home, the survey uncovered upcoming trends that some homeowners already consider essential features. 

1. Home cinema: 1 in 10 homeowners want to watch the latest box set or film in style with a home cinema set up. 
2. Boiling water tap: Kettles are deemed too slow for 9% of people, who believe a boiling water tap is now a must-have kitchen gadget. 
3. Dressing room: If you have a spare room, turning it into a dressing room could make your home more attractive, as 7% consider this additional space to be a must-have. However, losing a bedroom or storage could reduce the value of your property too. 
4. Home gym: 7% of homeowners don’t want to pay for a gym membership and consider a home gym essential for improving their health and fitness. 
5. Hot tub: Perhaps surprisingly given rising energy prices, 3% of homeowners believe that a hot tub is a must-have feature for their home. 

Don’t forget about your garden: A quarter of potential buyers say a beautiful outdoor space could tempt them

When updating your property, don’t forget about the outside.

Gardens and outdoor spaces became a key feature during Covid-19 lockdowns when families couldn’t go out. The Halifax survey suggests that gardens are still an important part of creating the perfect home. In fact, 26% of people said a beautiful garden could convince them to buy a property they may otherwise discount. 

There are two key features that prospective buyers focus on: 

1. Grass: While grass can require work to maintain, the survey found that almost half (47%) of people say it’s their preference and would choose it over artificial options or paving.
2. Outdoor building: Whether a shed that’s handy for storage or an outbuilding that’s perfect for entertaining, 33% of people consider an outdoor building an important feature. 

Gardening has plenty of benefits. As well as giving you an outside space to enjoy, it can be great exercise and provide a mental health boost too. However, if you’re hoping to sell your home, be cautious of creating a high-maintenance plot – 47% of people said it’d put them off a property. 

Contact us to talk about your home

Whether you want to create a beautiful home to live in or are getting ready to move, we could help.

In some cases, you could borrow more against your home through your mortgage, which you could use to turn your property into your dream home. If it’s something you’re thinking about, we could help you understand the long-term cost, find a lender that’s right for you, and offer support throughout the application process. 

If you’re planning to move, we’re also here to help you find a mortgage for your new property. Please contact us to arrange a meeting. 

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

Think carefully before securing other debts against your home.