The Autumn Statement aims to support economic growth through conventional measures, focusing on tax reductions, increased wages, and lower inflation.
The key measures are:
- State Pension Increase
- Pensioners are set to receive an 8.5% boost in their State Pension, marking the second consecutive record-high increase due to the triple lock mechanism.
- The triple lock determines State Pension increments based on the highest of three measures: average wage growth, inflation, or a minimum of 2.5%.
- This year’s increase, up by £17.35 per week, brings the full new State Pension to £221.20 weekly from April 2024, a yearly boost of approximately £900.
- National Insurance Adjustments
- Significant cuts to National Insurance (NI) rates were announced.
- The main employee NI rate will decrease from 12% to 10%, effective from the 6th January 2024.
- Additionally, major NI cuts for the self-employed are scheduled, including the abolishment of Class 2 contributions in April 2024 and a reduction of Class 4 contributions (paid on profits between £12,570 and £50,270) from 9% to 8%.
- National Living Wage Increase
- The National Living Wage will rise to £11.44 per hour from April 2024, including 21 and 22-year-olds for the first time. This increase could also bring more people into auto-enrolment for pension plans.
- Investment and Business Focus
- A £4.5 billion investment in British manufacturing over five years was announced, with an emphasis on sectors like automotive, aerospace, life sciences, and clean energy.
- A ‘growth fund’ in the British Business Bank aims to facilitate UK pension fund investment in start-up companies.
Measures directly impacting personal financial planning are:
1.’Pot for Life’ Pension Concept
- The Chancellor proposed consulting on a ‘pot for life’ for pension savers, allowing continuity across jobs by having contributions directed into an existing pension pot rather than creating a new one with each job change.
- The aim is to prevent the loss of pensions, as nearly £27 billion is estimated to sit in forgotten or small pension pots.
- ISA changes, increasing flexibility
- Starting April 2024, individuals will be able to open multiple ISAs of the same type, allowing flexibility within the £20,000 yearly ISA allowance.
- Partial transfers will be allowed between providers within a tax year.
- The need to reapply for an existing dormant ISA each tax year will be removed.
- All adult ISAs will be available to invest in from the age of 16.
- Lifetime allowance (LTA) removal
- In the Spring Budget, the Chancellor announced plans to scrap the pensions lifetime allowance.
- The LTA will be removed as planned from April 2024. Details are due in the Autumn Finance Bill (yet to be published).
- The Bill is expected to clarify the taxation of lump sums and lump sum death benefits, application of protections, as well as the tax treatment for overseas pensions, transitional arrangements, and reporting requirements.
- The government U-turned on earlier proposals for a ‘pensions death tax’; HMRC confirmed income withdrawals taken by beneficiaries where the member died before age 75 will not be taxed (as suggested in July).
To get specialist advice on how the changes will affect you, call us on 01858 469910 or email us at hello@radiantfinancial.co.uk.