The 2023 Pension Changes Both Savers and Retirees Need To Know
Whether you have already retired, are preparing to do so within the next few years or still saving for your future, here are the 2023 pension changes you should account for in your planning.
The State Pension is due to rise in April 2023
The State Pension is due to rise by a record-breaking 10.1% in April 2023, following a lower than usual increase in April 2022 while the pensions triple-lock was suspended due to the pandemic.
In April 2023, the full State Pension will rise from £185.15 per week to £203.50 per week, giving an annual income of £10,600. At the same time, the basic State Pension will rise from £141.80 per week to £156 per week for an annual income of £8,100.
Both the full and basic State Pension will therefore remain within the tax-free personal allowance of £12,750.
Pension Credit is rising too – and many don’t realise they’re eligible to claim
Just like the State Pension, Pension Credit is due to rise by 10.1% in April 2023. This means-tested benefit tops up retirement income and can help recipients qualify for other benefits, however many retirees don’t realise they are eligible to claim.
In April, Pension Credit could top up the weekly income of a single person to a maximum of £201.05, and could top up the joint weekly income of a couple to £306.85.
As well providing a valuable income boost, Pension Credit can help eligibility for other means tested payments including cold weather payments, help with NHS costs such as dental work and glasses and, for those aged over 75, a free TV licence.
Those in receipt of Winter Fuel Payments are due to receive an additional £300 Pensioner Cost of Living payment in winter 2023/24, having received this payment for the first time in January 2023.
Introduction of Pension Dashboards to help savers plan with confidence
In order to help people plan with confidence for their retirement, the Pensions Regulator has mandated the introduction of online ‘Pension Dashboards’. These portals will include information about pension pots, final salary pensions and the state pension. A pension dashboard will enable consumers to see the current value of their pensions, discover administrative details about their pots, and assess their estimated income from these pensions in retirement – all in one place and due to begin rolling out from April 2023. Easier access to pension information is intended to support decisions around retirement planning and pension consolidation, as well as making it easier for people to keep up to date with pensions from previous employment.
No increases in annual allowances may affect some savers
Tax-free allowances will remain frozen this year, which may see some retirement savers pay more tax over the years as their income and savings increase.
The Lifetime Allowance is due to remain frozen at £1,073,100 until at least April 2026. This allowance sets the maximum amount which can be saved in a pension before taxes are due to be charged when withdrawing money from the pension pot. Savers with large pots, particularly those in defined benefit or ‘final salary’ pensions may be unaware of their liability under this allowance.
The Annual Allowance, which sets the amount which can receive tax relief when saved into a pension each year, will also remain unchanged in 2023/24, at £40,000.
Longer term changes to State Pension and private pension age rules
Retirement planning is all the more important in light of the rising age of State Pension eligibility, with private savings required for those who wish to retire early.
Currently, men and women can both access the State Pension from the age of 66, and this is due to rise to 67 by 2028 and rise again to 68 by 2037/39. There is however speculation that the UK Government wish to bring forward the timescale for the rise to 68, and a review of State Pension age is due to be published in early 2023. If the Government acts in line with previous practice, there should be a gap of at least ten years between a reduced age of eligibility being announced and the change coming into effect, which suggests that the move to 68 may impact those planning to retire from 2033 onwards.
Savers with private pensions should also be aware of changing ages of eligibility. In 2028, the age at which savers can access private pensions will rise from 55 to 57.
At McCrea, our annual reviews make sure your pensions and retirement plans remain on track to support the retirement you deserve. Whether you’d like an expert eye on your current plans or don’t know where to begin with retirement planning, we can help. Why not contact one of our award-winning advisers today for a no-obligation chat on how we could help you relish your retirement?