Spring Statement: Pensions update

Jeremy Harris, Pensions partner at Fieldfisher, provided a statement to Lexis®PSL regarding the impact of the Spring Statement on Pensions. The accompanying analysis in addition to the Private Client announcements, covering tax and other key announcements across the other Lexis®PSL practice areas on its dedicated Spring Statement page can be found here.

The 2022 Spring Statement hasn't made any changes relating specifically to pensions: The standard lifetime allowance, the limit on an individual’s tax beneficial career pensions savings, remains frozen at £1,073,100 until the 2025/26 tax year and the ordinary annual allowance, the limit on an individual’s tax beneficial annual pension contributions or benefit accrual, remains frozen at £40,000.
 
Those limits will restrict the tax benefits which can be built up using registered pension schemes and an increasing number of people will be caught by those limits.
 
The Spring Statement does include certain reductions in direct taxation which will reduce the tax reliefs that apply to registered pension schemes and increases the annual NICs Primary Threshold for employees and the Lower Profits Limit for self-employed persons from £9,880 to £12,570 from July 2022.
 
The Statement announces that the basic rate of income tax will be reduced from 20% to 19% from April 2024.
 
In addition to the immediate changes announced, the Statement contains a warning at paragraphs 4.67 to 4.69 that the government will consider reform to the system of tax reliefs and allowances to reduce complexity, unfairness and inconsistency. This definitely poses a potential threat, but it is unclear whether such reform might involve reductions in pensions tax reliefs but the government is to confirm its plans on tax reliefs and allowances before 2024.