The pension reforms will inevitably be welcomed by senior public sector workers, especially NHS consultants and doctors, as the pension tax charges have been discouraging them from continuing in their roles at the very time there is a healthcare skills shortage and long waiting lists. The BMA had lobbied hard for this change and welcomed the announcement; it will help others in the public sector, such as education leaders, as well.
The increase in the Annual Allowance will also benefit those in the decade or so before retirement who may be wanting to boost their pension pot, perhaps because they were unable to contribute much early on in their career. It will give them the chance to play catch-up without incurring huge tax penalties.
There was one other important change which the Chancellor didn’t mention in his speech. Prior to the Budget, those who had opted for early retirement and flexibly drawn benefits from their pension pots were limited to annual contributions of just £4,000 if they subsequently returned to work – for example people who stopped working during the pandemic and then decided to ‘un-retire’.
That limit was increased in the Budget to £10,000, which is an important concession designed to encourage economically inactive people of working age back into the workforce.
The new limits come into force with the new tax year on 6th April. The taper in allowances for very high earners also still applies (albeit at a slightly higher level), so as ever it is important to take expert advice before taking action in response to the Budget announcement.
Read the Spring Budget 2023 summary.