Pension pulse – a reminder for ’25

Aside from the change announced about bringing unused pension pots into IHT from April 2027, other announcements relating to pensions were thin on the ground during the Budget speech.

The Chancellor confirmed that the State Pension will increase in line with average earnings, rising by 4.1% in April 2025. The new flat rate State Pension is expected to rise to £230.25 a week, the old basic State Pension is anticipated to rise to £176.45 each week.

A reminder about current pension allowances and thresholds:

  • The Annual Allowance (AA) threshold is £60,000
  • The Money Purchase Annual Allowance (MPAA) and the minimum Tapered Annual Allowance (TAA) are £10,000
  • The adjusted income threshold for the TAA is £260,000
  • The Lifetime Allowance and charge have been abolished
  • The maximum Pension Commencement Lump Sum (PCLS) is £268,275.

A significant shift

The end of the IHT exemption for pension pots will prompt some rethinking of retirees’ decumulation strategies as people focus on using their pension for retirement income rather than estate planning purposes. The Chancellor expects 8% of estates will be impacted annually. It really is a significant shift worth planning for.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. The Financial Conduct Authority (FCA) does not regulate Will writing, tax and trust advice and certain forms of estate planning.

Related Post

The power of participation – markets move – participation matters 

Investors are constantly navigating changing narratives. Last year markets rebounded to reach new highs following President Trump’s spring trade announcements, despite ongoing geopolitical and economic uncertainty. More recently, the conflict in the Middle East has prompted more market moves.   Periods of volatility can be uncomfortable and emotions can run high, but history consistently shows that markets rise and fall over time. The key is not avoiding these movements but participating through them.   Time in the market beats timing the market   When markets are hitting highs, it’s natural to feel conflicted – you don’t want to miss out, but you also fear investing just before a downturn. These concerns often prevent people from taking the most important step – getting invested. Trying to time the perfect entry point is extremely difficult, even for professionals. Instead, time in the market has proven

Read more...