Pension pulse – a reminder for ‘25
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Pension pulse – a reminder for ‘25
Aside from the change announced about bringing unused pension pots into IHT from April 2027, other announcements relating to pensions were thin on the ground during the Budget speech.
The Chancellor confirmed that the State Pension will increase in line with average earnings, rising by 4.1% in April 2025. The new flat rate State Pension is expected to rise to £230.25 a week, the old basic State Pension is anticipated to rise to £176.45 each week.
A reminder about current pension allowances and thresholds:
- The Annual Allowance (AA) threshold is £60,000
- The Money Purchase Annual Allowance (MPAA) and the minimum Tapered Annual Allowance (TAA) are £10,000
- The adjusted income threshold for the TAA is £260,000
- The Lifetime Allowance and charge have been abolished
- The maximum Pension Commencement Lump Sum (PCLS) is £268,275.
A significant shift
The end of the IHT exemption for pension pots will prompt some rethinking of retirees’ decumulation strategies as people focus on using their pension for retirement income rather than estate planning purposes. The Chancellor expects 8% of estates will be impacted annually. It really is a significant shift worth planning for.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. The Financial Conduct Authority (FCA) does not regulate Will writing, tax and trust advice and certain forms of estate planning.
It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. If you withdraw from an investment in the early years, you may not get back the full amount you invested. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency.
Information is based on our understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.
Tax treatment is based on individual circumstances and may be subject to change in the future.
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