Autumn Statement 2023 - Pensions and Savings

The Chancellor’s 2023 Autumn Statement is perhaps more remarkable for what it did not include, rather than what it did. Financial planners had widely been expecting ISAs to benefit from an increase in annual allowance and a simplification.

The statement says they are “making changes to simplify ISAs and provide more choice, meaning it will be easier for people to choose the best ISA accounts for their needs and move money between them.” In simple terms, this translates to allowing multiple subscriptions in the same tax year starting from April 2024. The hope will be to make ISA more accessible although time will tell if this makes any material change.

The most significant point of difference is being able to split your annual allowance of £20,000 between cash and shares with different providers in the same year.

Despite this being a relatively minor change, the value of an ISA is it provides a valuable shelter from both income tax and capital gains tax at a time when it is extremely valuable.

Additionally, there was an expectation that Inheritance Tax would get some airtime, even if it was signalling a future change, but that too did not materialise.

The headline in financial planning is undoubtedly State Pension, with Jeremy Hunt announcing the Government would honour its commitment to the triple lock, which determines how much it will increase. As a result, it will go up by 8.5% meaning from April 2024 it will be worth:

• £221.20 a week for the full, new flat-rate State Pension (for those who reached State Pension age after April 2016)
• £169.50 a week for the full, old basic State Pension (for those who reached state pension age before April 2016)

Predominantly this is good news, especially for those who depend on the State Pension as their main or only source of retirement income. It should be noted that State Pension dies with the recipient, meaning that a surviving spouse or partner would lose a big chunk of income.

The increase will also have a material impact on those with other sources of retirement income, potentially pushing them into either a higher tax bracket or at least having more income subject to 20% income tax meaning that additional planning may be required.

Over and above the State Pension, a consultation was announced on the ‘pot for life’ concept, where an employee can port their pension pot from one employer to another. There is an obvious upside to this potential approach, but there are serious reservations around the infrastructure and capability to make this work across pension providers, payroll providers and employment tax specialists. We await further details on this proposal, but I expect it to meet some resistance along that journey.