State Pension to increase by 8.5% from April 2024
The chancellor announced that the government will honour their commitments and the state pension triple lock will remain in place. This lock guarantees that state pension payments rise by whichever is the greatest of the three following measures: inflation, earnings over the previous year or 2.5%.
The total pay figure in September proved to be the highest figure of the three due to high public sector bonuses in July. As such the state pension will increase by 8.5% meaning anyone receiving a full state pension from April 2024 will receive £221.20 a week. Individual circumstances may cause this to vary.
A Pension for Life: employees may be able to choose where their pension is paid
Amid the swathe of announcements in the autumn statement, an interesting potential change to employer pensions was announced – “a pot for life”. Currently, employers must automatically enroll eligible new staff into a pension scheme, this scheme is chosen by the company. Today Jeremy Hunt announced that he would consult on a pension for life and giving employees a legal right to choose to nominate an existing pension pot into which employer contributions are paid.
People can and do move jobs numerous times within their lifetime meaning that people are ending up with multiple smaller pension pots with various different providers. This makes it easy to lose track of a pension and therefore miss out on income in your retirement.
Matthew Tyerman, Managing Director of TaxAssist Financial Services said: “Conceptually this is a great idea. With the help of their Independent Financial Adviser, employees will be able to take charge of their retirement, and get a pension with appropriate investments aligned with their goals, taking into account risk, reward, and their own personal circumstances such as age and goals in retirement and ensure it’s all value for money. Of course, employer’s will need to be tuned into the new rules, when they start, and how to administer the new regime. No doubt we will also be advising employers in the coming years on this topic.
Changes to National Insurance
National Insurance rate cut from 12% to 10%
Hunt said employee Class 1 National insurance will be cut by 2 percentage points from 12% to 10% from 6 January 2024. A simple change but one which payroll software providers will have to implement quickly.
Self-employed people to pay less in National Insurance
From 6th April 2024, Class 2 National Insurance Contributions (NIC) will be abolished. This means that sole traders with profits above £12,570 will no longer be required to pay Class 2 NIC. They will, however, continue to receive access to contributory benefits, such as the state pension. Where a self-employed person’s profits are between £6,725 and £12,570, entitlement to contributory benefits will be maintained. Those sole traders with profits under £6,725 can continue to pay voluntarily Class 2 to get access to contributory benefits.
In addition, Class 4 National Insurance will be reduced from 6th April 2024 from 9% on profits between £12,570 and £50,270 to 8%.
Inheritance tax
Last week there were many reports that inheritance tax would be cut or even abolished. This was not the case as Chancellor Jeremy Hunt appeared to go through an entire speech without even mentioning inheritance tax. Therefore, estates remain liable to tax at up to 40% and subject to various allowances. Our free to use inheritance tax calculator is unchanged and can be accessed here.
ISA simplification
From April 2024, the government will allow individuals to have multiple subscriptions to same category ISAs every year. Currently, savers are restricted to saving in one ISA in each category per tax year. This simplification doesn’t affect many people but is of course welcome.
Jeremy Hunt's Autumn statement today outlined a comprehensive set of measures aimed at backing business, reducing barriers to investment, reducing debt and cutting taxes. The commitment to an 8.5% increase in the State Pension from April 2024 reflects the government's dedication to honouring its promises and ensuring financial security for retirees. The proposed "Pension for Life" initiative is a noteworthy step toward empowering employees to take control of their retirement planning, providing them the option to choose where their pension contributions are invested. Additionally, changes to National Insurance, including a rate cut and reductions for self-employed individuals, demonstrate a commitment to supporting workers. Overall, the Autumn statement introduces a mix of positive changes, with a focus on individual financial planning and retirement security.