Pension legislation never stands still. Successive governments have tinkered with rules, legislation, allowances and payments and 2020 will be no different in this regard.
So, to help you understand what changes are in the pipeline, here’s your complete guide to the pension changes coming in 2020 – at least the ones we know about so far.
General Election result means pensions legislation set to proceed
The Conservatives included a number of pension-related pledges in their recent manifesto, and the decisive outcome of the election means that they can now implement these commitments.
- A review of the Tapered Annual Allowance, and changes to this could affect anyone earning in the region of £110,000 to £210,000
- Raising the National Insurance threshold to £9,500. This impacts how much people will need to earn each week to contribute towards their eligibility for the State Pension
- A review of ‘net-pay’ schemes to try and ensure that savers in net-pay schemes receive the same level of tax relief on pension contributions as savers in relief-at-source schemes
- Reintroduce the Pension Schemes Bill which fell on the dissolution of the previous parliament. This bill introduced several changes, including the introduction of ‘defined ambition’ pension schemes and measures to push forward pension dashboards.
Nigel Peaple, Director of Policy and Research at the Pensions and Lifetime Savings Association, said: “I congratulate prime minister Boris Johnson on his election win and look forward to his government’s renewed energy to reform pensions so everyone has a better income in retirement.
“Ensuring adequate contributions, fostering effective engagement and allowing well-run schemes to operate at appropriate scale provides the blueprint for making the greatest difference to the greatest number of people. We must get on with improving the system.”
State Pension set to rise in April 2020
The rise in the State Pension age to 66 (for men and women) is set to be complete by October 2020 as the transition phase comes to an end.
If you’re in receipt of the State Pension, or you will be in 2020, there is good news as the ‘triple-lock’ commitment to State Pension increases means the weekly amount is set to rise by almost 4% from April 2020.
The full new State Pension will be £175.20 a week, up from the current £168.60. And, with the government having committed to retaining the triple-lock for the duration of this parliament, means that pensioners can expect to see their pension increase by at least 2.5% every year.
Note that the most recent information shows around 37% of people reaching State Pension age receive less than the full amount, with approximately 27% getting more than the full amount.
Ensuring you get an individual State Pension forecast and chatting to your financial planner is the best way of getting an accurate picture of how much you’ll retire on.
Lifetime Allowance rise
While the rise in the value of the State Pension is determined by the triple-lock, changes to the Lifetime Allowance are linked to price inflation, not earnings growth.
This means that the Lifetime Allowance will only increase by 1.7% in April 2020, to £1.073 million (up from £1.055 million).
This represents the maximum amount that can be saved into a pension while still receiving tax benefits enjoyed by pension savings, and so any increase is useful even if it is only a small rise in 2020.
For Defined Benefit pensions, the limit is set as an annual income and is expected to increase from £52,750 to £53,750.
Age 50 or over? Expect to receive a pension ‘wake-up’ pack
Since 1 November 2019, pension providers have been obliged to issue ‘wake-up packs’ to clients. These packs are designed to help individuals engage with their pensions, and initial communication starts at age 50.
Packs then need to be sent at least every five years until you have fully crystallised your pension pot and could continue to be sent after the age of 75. Other ‘triggers’ could mean packs are sent more regularly and so you may start to receive these packs annually.
These new-style packs contain risk warnings and may lead you to go back to your adviser to check the recommended course of action.
Get in touch
If you have received a ‘wake-up’ pack from your pension provider, or if you’d like to discuss your pension and retirement planning, please get in touch. Email email@example.com or call (0161) 8080200.
A pension is a long-term investment not normally accessible until 55. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected the interest rates at the time you take your benefits. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.