Pensions have come through Chancellor John Healey’s first Budget largely unscathed, providing relief to both those nearing retirement and providers.
The £268k tax-free lump sum entitlement was once again the subject of speculation in the run-up to the event.
Healey chose not to cut the allowance though, or impose any other related restrictions.
As expected, Healey confirmed that the 3.9% rise in the state pension to £13,036 per year will not mean people who have it as their sole income will start paying tax. The income tax threshold will rise to this figure for this group of pensioners.
Kate Smith, head of pensions at Aegon, said: “Savers need confidence that the pension rules they’re planning around today will still be there tomorrow, so today’s low-key Budget for pension savers is good news.
“We welcome the Budget’s ‘no pensions drama’ approach. Retirement saving is a long-term journey, and people are best served by stability and certainty rather than constant speculation about possible changes and tinkering at the edges.
“People saving for retirement need confidence that they can plan for the future without constantly second-guessing the rules,” she continued.
“Long-term financial planning works best when people can make decisions with certainty rather than reacting to recurring speculation and changes to the pension tax rules.
“A ‘boring Budget’ may not have created many headlines, but for pension savers it has been one of the best possible outcomes.”
Malcolm Reynolds, Aptia’s UK President, added: “The chancellor’s confirmation that pensioners whose income is no more than the full new state pension will not pay income tax had been widely anticipated.
“With Aptia research showing that 37% of retirees are concerned the rising cost of living could leave them without enough income throughout retirement, this measure will provide reassurance to many older people.
“It also reinforces the chancellor’s ‘steady as she goes’ approach to pension tax policy, opting against significant reforms while the industry awaits the findings of the Pensions Commission.
“However, we are still awaiting details on how the new arrangements will apply to pensioners with small workplace pension savings.”
