With an election on the horizon, inflation having fallen to 4.6% from a high of over 11%, and the Government feeling they have some financial wriggle room – the Autumn Statement was always likely to focus on measures that would appeal to the public.

In this update, we provide you with a brief summary of the Autumn Statement, our latest Investment View and a brief update on Inheritance Tax which was absent from the Autumn Statement at a time when Treasury have reported increased inheritance tax receipts… again!

If you have any questions, please don’t hesitate to get in touch with us.

Kind regards
Team Intelligent Pensions

Autumn Statement

Below are some of the key headlines from the Autumn Statement:

Pensions

It was confirmed that the Government will legislate in the Autumn Finance Bill 2023 to remove the Lifetime Allowance.

Much of the detail regarding the taxation of lump sum benefits and the treatment of existing LTA protections will not be known until this is published however documents released alongside the chancellor’s statement have put to bed two common conceptions based on their previous announcements:

  • Pension benefits paid out on death before age 75 will continue to be excluded from income tax.
    It was probably never the government’s intention to tax ‘early death’ benefits, but the proposals as laid out failed to specifically exempt them, leading to accusation of additional taxation y stealth.
  • Individuals who have already utilised their full LTA will not be able to take additional tax-free cash.
    The maximum amount of tax-free cash remains at £268,275 (25% of the lifetime allowance of £1,073,100), except where individual protections were in existence prior to 6 April 2024. A new ‘pension commencement excess lump sum charge’ will replace the current lifetime allowance excess lump sum charge for this purpose.

It has also been confirmed that the restrictions affecting further benefit accrual for individuals with certain existing protections* will no longer apply. Further pension contributions are now possible without affecting the taxation of future benefits. Any benefits which exceed the previous LTA will of course still be taxed, either as normal income or as an excess lump sum.
If you would like further information about how this affects your own personal position, please do get in touch. We would however ask you to bear in mind that until the legislation is published some uncertainly is likely to remain.

The Finance Bill 2023 will take effect from 6 April 2024.

* Enhanced Protection, Fixed Protection, Fixed Protection 2014, and Fixed Protection 2016.

State Pension

The state pension will increase by 8.5 per cent in April 2024 in line with the pension ‘triple lock’.

Tax

  • National Insurance Contributions 
    • The main rate of Class 1 employee NICs will be cut from 12% to 10% from 6 January 2024.
    • The Government will also support the self-employed by cutting the main rate of Class 4 self-employed NICs from 9% to 8% from 6 April 2024. In addition, Class 2 self-employed NICs will be abolished from 6 April 2024 for individuals with profits over £12,570, but they will continue to receive access to contributory benefits, including the State Pension.
  • Married Couple’s Allowance (MCA) and Blind Person’s Allowance (BPA)
    • The Government will uprate the BPA and the MCA by the September CPI figure of 6.7% in 2024-25. The BPA will be valued at £3,070 and the MCA will be valued at between £4,280 and £11,080.
  •  National Living Wage
    • From 1 April 2024, the National Living Wage will increase by 9.8% to £11.44 with the age threshold lowered from 23 to 21 years old.

ISA Investments (Individual Savings Accounts)

The following will come into force from April 2024:

  • Multiple ISA subscriptions: People will be allowed to open and pay into multiple ISAs of the same type in a single tax year.
  • Partial transfers allowed: People will be able to transfer part of one ISA to another, rather than being forced to transfer the whole amount.
  • No more reapplying: Currently, people are forced to reapply for an ISA each year.
  • Expanding Innovative Finance ISAs: The Government will allow Long-Term Asset Funds and open-ended property funds with extended notice periods to be permitted investments.
  • Allowing certain fractional shares: ISAs will also be allowed to hold fractional shares. This is a positive move and may appeal to younger generations in particular who would like to invest in expensive stocks such as Apple, Tesla and Amazon.

Investment View  November/December 2023

As we head towards the end of the year, the investment landscape remains enormously challenging across almost all asset classes. The S&P 500 stock index has fallen into “correction” territory as investors worry about interest rates, increasing geopolitical risks, and lacklustre corporate earnings. Equity markets across the globe have struggled for much of the year and bonds have also had another very difficult time following on from the annus horribilis of 2022.

To read our full Investment View, please click here.

Fund Changes:
BNY Mellon Fund Managers Limited announced the merger of the BNY Mellon Index Linked Gilt Institutional Accumulation fund into BNY Mellon Index Linked Gilt Institutional W Accumulation fund with effect from 30 September 2023. Holders of the fund received new units of equivalent value in the new fund, and these have already been credited to accounts. No action is required in respect of this change.

Inheritance Tax – could you do more to avoid it?

The government is on course to collect record inheritance tax (IHT) receipts for the third year in a row. Not surprising when you consider the £325,00 personal allowance has not risen since 2009.

HMRC’s latest data shows that £4.6bn of IHT was collected through the first seven months of the financial year (April 23 to October 23) which is a 12% increase on the £4.1bn collected in the first seven months of 2022. Forecasters predict revenues will rise from £7.6bn currently to a staggering £10.9bn in the next 5 years.

At Intelligent Pensions, we have extended our advice offering to include Inheritance Tax Planning advice so that we can help our clients, who don’t have a general financial adviser, to assess their options, especially linked to your pension plan, and navigate this complex area of advice.

We plan to run a webinar in early 2024 to provide an overview of IHT and the practical actions that you could consider to mitigate paying IHT and ensuring your family/beneficiaries receive more of your estate than the tax man does!

Please let us know if you would be interested to learn more.