Whether you’re a pension saver or already retired, there are several changes to pensions to watch out for in 2024.
With a looming Spring Budget, not to mention a general election this year, there could also be other changes on the horizon, such as an inheritance tax cut, or overhauling the state pension triple lock.
For now, we run through the key dates and big changes that are happening this year, plus any government announcements and consultations that could affect your pension savings.
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1, STATE PENSION TO INCREASE BY 8.5%
Pensioners will get another above-average boost to their state pension this April, with payouts rising by 8.5%.
The triple lock means the state pension increases every year by the highest of inflation, average earnings growth or 2.5%. The wage growth figure decided the 2024 rise, after the CPI inflation number came in at 6.7%.
The increase takes place on the first Monday after the start of the new financial year, meaning pensioners will see the increase to their payments from 8 April.
The full new state pension will rise to £221.20 a week, from £203.85. This adds up to £11,502 a year, compared to the current £10,600. Meanwhile, the full basic state pension will rise to £169.50 a week, from the current level of £156.20.
How much state pension you get depends on your National Insurance record, so you could get less than the headline rates.
2, PENSION CREDIT WILL ALSO RISE
The amount of pension credit paid by the government will also increase in April. Pension credit is one of the most underclaimed and misunderstood benefits. Up to £2.1 billion of available pension credit went unclaimed in 2021/22, according to official figures.
If you are over state pension age (66) and your income is less than £201.05 a week, pension credit will top you up to that amount. For a couple, the combined income figure is £306.85.
From April, pension credit will top you up by an extra £17.10 a week (from £201.05 to £218.15). For couples, the increase is £26.10 (from £306.85 to £332.95).
This represents an 8.5% increase, the same as the state pension.
This top-up is known as “guarantee credit”. There is another part of pension credit called “savings credit”. You could be eligible for one or both parts.
Savings credit is payable to people who reached state pension age before 6 April 2016.
If you're eligible you'll get up to £15.94 a week (£17.84 if you have a partner). This amount is rising by 6.7% (CPI inflation in September 2023), so from April, you'll get up to £17.01 a week (£19.04 if you have a partner).
3, LIFETIME ALLOWANCE TO BE ABOLISHED
The pension lifetime allowance will be scrapped altogether from 6 April, 2024.
Last year, chancellor Jeremy Hunt ditched the lifetime allowance tax charge for pension savers that breach the £1,073,100 total limit that can be held in pension pots - but some legacy rules still remain.
This last bit of legislation will axe the allowance entirely.
It will bring cheers from pension savers with big nest eggs and those working in the public sector with large final salary schemes.
Note that although the lifetime allowance is being abolished, there will still be a cap (of £268,275) on the tax-free lump sum you can take from your pension.
Also note that if Labour wins the election, it could reinstate the lifetime allowance. In the aftermath of Hunt's announcement in the Spring 2023 Budget, Labour promised to reinstate the lifetime allowance if it won the next election.
Pension savers should keep a close eye on what Hunt's potential successor, Labour's Rachel Reeves, has to say on the issue and if there is anything on it in the party manifesto.
4, ONLINE STATE PENSION TOP-UP SYSTEM TO GO LIVE
An online service designed to simplify how you check your state pension and pay for missing National Insurance (NI) credits is due to launch within the next few months.
Many people bought extra NI credits last year and boosted their state pension by thousands of pounds. The government has extended the state pension top-up deadline several times due to huge demand - you now have until April 2025.
The good news is the government has confirmed it is setting up a digital tool to make the process easier. It should launch in the 2023-24 financial year, meaning it should be live before 6 April, 2024.
You can still get advice and pay for missing years over the phone (and this will still be available once the online service launches). Contact the Future Pension Centre on 0800 731 0175, or if you're already at state pension age, contact the Pension Service on 0800 731 0469.
5, “Pot for life” plans will start to take shape
A consultation on giving workers a single “pension pot for life” was announced in the Autumn Statement.
The idea is that instead of people building up lots of pension pots as they change jobs, they would have just one that they and all employers save into throughout their working lives.
It sounds like a simple idea, but there are lots of details to iron out.
Questions have been raised about charges, and how easy it would be for pension savers to pick the best pot for life for their needs.
There is also the issue of whether a pension scheme that looks like a decent option when you are in your 20s will still be suitable as you approach retirement.
It is unclear what Labour thinks of the proposals. While the pot of life model will take years to become reality, we should hear more from the government this year about responses to the consultation and possibly what Labour thinks of the idea.
Ruth is passionate about helping people feel more confident about their finances. She was previously editor of Times Money Mentor, and prior to that was deputy Money editor at The Sunday Times.
A multi-award winning journalist, Ruth started her career on a pensions magazine at the FT Group, and has also worked at Money Observer and Money Advice Service.
Outside of work, she is a mum to two young children, a magistrate and an NHS volunteer.
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