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General election 2024 – pension and tax insights

Read our straightforward roundup to help make sense of party manifestos and prepare for the general election on 4 July.

Published on 13 Jun 20243 minute read

The Institute for Fiscal Studies and the International Monetary Fund advised both parties’ public finance projections indicate a significant funding gap of up to £30billion, unless unscheduled spending cuts are enforced.

This overview focuses on the impact the upcoming general election could have on your financial plans. 

Affordability of the triple-locked state pension 

The affordability of the triple-locked state pension is a can that keeps getting kicked down the road and an election is not the time that either main party is likely to break that pattern. 

Good to know – it’s a good idea to assume the triple lock might not be sustainable for more than a decade, and that you might need to save more than you think. Find out how regular savings can help make a difference to an investment portfolio over the long-term.

What if the pension lifetime allowance or LTA is reintroduced?

  • It seems unlikely a new LTA would be set back at its most recent £1.073 million – a level that landed doctors and surgeons with unwelcome tax charges, exacerbated staffing shortages in the NHS and led to Hunt’s decision to abolish the threshold
  • Under the last Labour government, the LTA ended up at £1.8 million, which would now be worth over £2.5 million if adjusted for inflation since. It wouldn’t be surprising if the LTA was reintroduced at something like the £2 million mark
  • If you are keen to take any action such as recommence lump sum or regular pension contributions or take your 25% lump sum, it is a good idea to seek professional advice as taxation depends on individual circumstances

A future Government would have to pass new legislation to reintroduce the LTA which would likely take the form of a Finance Bill on the back of a Budget, and Shadow Chancellor Rachel Reeves has ruled out a summer Budget. 

The legislative process takes time and is unlikely that a new LTA could be in place until April 2025.

Good to know – you can watch our experts’ top tips for What makes a successful retirement plan including how tax allowances can help maximise retirement savings, the benefits of cashflow modelling and if phased retirement could be an option for you.

Could the annual allowance increase be reversed?

  • The annual allowance is arguably an easier and more efficient way to cap the amount spent on pension tax relief than the LTA, so some sort of reversal of the annual allowance increase is not unthinkable, whether it comes alongside or instead of a new LTA

 What other pension changes could we expect?

  • Reduce or do away with the 5% pension commencement lump sum
  • Limit tax relief on pension contributions

Good to know – either of these measures would be controversial, and the latter would be an administrative challenge, so they are perhaps unlikely, at least early on.

Overall, it’s important to consider your options carefully and get an expert’s perspective on your plans before acting in response to possible changes.

How Bestinvest can help you

At Bestinvest, we understand the value of a conversation with an expert who can help you. That’s why we offer free coaching with financial planners. Please bear in mind no personal advice will be given during these sessions. A Coach will highlight considerations and provide expert insight to help you manage your money ranging from your portfolio to retirement planning and taxes, to inheritance tax and annual allowances – and help you plot a path to achieve your financial goals. It’s easy to arrange free coaching whenever suits you, and there’s no ongoing commitment. 

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