Spring Budget 2023: Private sector Trust-based occupational pension schemes

Shona Harvie, Partner, Pension Funds

The significant pension changes announced have been discussed in the run up to many previous Budgets and the removal of the lifetime allowance cap is a welcome surprise recognising that the tax issues do not just impact doctors.

What are the changes?

  • The lifetime allowance cap of £1,073,100 will be abolished from
    6 April 2024 removing the lifetime allowance tax charge from 6 April 2023 and allowing individuals who have reached that cap to pay into pensions arrangements and receive tax relief on those contributions. The maximum lump sum for those without protections will remain at £268,275.
  • Although most private sector Trust-based defined benefit occupational pension schemes are now closed to members contributions, following the increase in the annual employee and employer contribution allowance from £40,000 to £60,000 from 6 April 2023, there may be an opportunity for individuals to increase contributions into other pension arrangements, such as defined contributions master Trust arrangements.
  • The money purchase allowance increase, triggered in certain circumstances where the member has accessed their pension pot, will allow annual contributions to increase from £4,000 to £10,000 and receive tax relief from 6 April 2023.

Further plans will be outlined in autumn, to encourage investment from defined contribution pension funds into the UKs innovative sector.

Next steps

Employers and Trustees should review their pension arrangements to ensure they are updated for these changes, including considering where there may be opportunities for members to make additional contributions and to adjust their arrangements for the lifetime allowance tax charge removal and money purchase allowance increase.

For more information, or to discuss this further, please contact Shona Harvie or your usual Crowe contact.

Contact us

Shona Harvie
Shona Harvie
Partner, Pension Funds Group