Chancellor Philip Hammond resisted the temptation to make further changes to the pension system in today’s Budget.
After the seismic changes in the pensions sector since April 2015, the Chancellor avoided further amendments.
There had been speculation that he would look at the system for pension tax relief or tinker with the state pension, but this didn’t materialise.
State pension increase
The government had already announced that those qualifying for the state pension before 6 April 2016 would see the basic pension amount rise from £119.30 per week to £122.30 from April 2017 onward.
People qualifying for the new state pension (eligible on or after 6 April 2016) will have their pension calculated for 2017/18 using a full level of new state pension amount of £159.55 (up from £155.65).
|State pension weekly payments for 2016/17 and 2017/18|
|Basic state pension (for pre-April 2016 claimaints)||£119.30||£122.30||2.51%|
|New state pension (for post-April 2016 claimants)||£155.65||£159.55||2.51%|
Annual and lifetime allowances
The ‘annual allowance’ and ‘lifetime allowance’ have been set at £40,000 and £1 million respectively for 2017/18.
The annual allowance is a limit on the amount that can be put into your pension each year, while still receiving tax relief. Over the course of your working life the limit is £1 million (the lifetime allowance).
Any contributions that exceed either the annual or lifetime allowances won’t receive tax relief and will incur an additional tax charge (known as the ‘allowance charge’).
If you’ve started to take money from your defined contribution pension (via income drawdown or an UFPLS) you’ll get a lower annual allowance of £4,000 for the 2017/18 tax year. This is called the Money Purchase Annual Allowance (MPAA) and was reduced from £10,000 the previous year.
|Annual and lifetime allowances for 2016/17 and 2017/18|
|Annual allowance||Lifetime allowance||Money purchase annual allowance|