Whether you’re a UK pension saver or already retired, there are several changes to pensions to watch out for in 2024.
The good news is that the state pension triple lock is safe for now, with Jeremy Hunt renewing the government’s commitment in his Spring Budget on 6 March. Hunt also confirmed the triple lock would be in the Conservative Party’s election manifesto, and reports suggest Labour plans to commit to the measure too.
From Monday 8 April, pensioners have once again been reminded just how valuable this measure is, as they started receiving the first increased payment of the new tax year. Their state pension has increased by 8.5% (roughly £20 a week).
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With a looming general election, there could also be other changes on the horizon. For example, the abolition of the lifetime allowance could be short-lived if the polls are correct and Labour forms the next government.
We've run through the key dates and big changes that are happening this year, plus any government announcements, future government policies and consultations that could affect your pension savings.
1. UK state pension has increased by 8.5%
Pensioners have received another above-average boost to their state pension as of Monday 8 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 full new state pension has risen to £221.20 a week, from £203.85. This adds up to £11,502 a year, compared to the previous £10,600. Meanwhile, the full basic state pension has risen to £169.50 a week, from the previous level of £156.20.
How much state pension you get depends on your National Insurance record, so you could get less than the headline rate.
2. Pension credit has also risen
The amount of pension credit paid by the government has also risen this year.
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 £218.15 a week, pension credit will top you up to that amount. For a couple, the combined income figure is £332.95.
This figure rose by £17.10 on 8 April, from the previous amount of £201.05. For couples, it rose by £26.10 (previously £306.85). 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 £17.01 a week (£19.04 if you have a partner). This figure rose by 6.7% on 8 April (based on CPI inflation in September 2023). Previously, you would have received £15.94 a week (£17.84 if you have a partner).
3. Lifetime allowance has been abolished
The pension lifetime allowance has now been scrapped altogether.
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.
This has brought cheers from pension savers with big nest eggs and those working in the public sector with large final salary schemes. But you should note that although the lifetime allowance has been abolished, there will still be a cap of £268,275 on the tax-free lump sum you can take from your pension.
It's also worth noting 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. It was meant to go live before the end of the financial year on 6 April, but has been delayed.
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.
But it is still time-consuming and complex to check and buy missing NI contributions, as it involves multiple phone calls and dealing with both HMRC and the Department for Work and Pensions.
The good news is the government has confirmed it is setting up a digital tool to make the process easier. However, savers will need to wait a little longer to access it.
This is Money first reported on the delays, stating: “The Government now says the online service will be introduced as soon as possible after the usual update to the National Insurance system at the start of the new tax year.”
After the story was published, This is Money said that the government told them the update would take place by 9 April, with the online service launching shortly afterwards.
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. In the Spring Budget, Hunt confirmed that the government would continue to explore these reforms - however he gave no timelines for when they might be implemented.
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.
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