Opportunities increase for pension investments

If you are a top rate taxpayer you may welcome the news that the pensions allowance landscape has shifted dramatically. In a reversal of the reduction of pension allowances which has been the trend since their peak in 2011, the constraint of the lifetime allowance has been removed, apparently allowing more freedom to save more. Meanwhile the annual and money purchase allowances were also raised in the March Budget. However, make sure you investigate your broader investment options before making any major changes Those who have reached the previous lifetime pension allowance limit still need to be wary of investing more in their pensions without consultation as they may find investing elsewhere could be more beneficial.

A concern for those approaching retirement is how to receive their pension income. The rise in inflation since the start of 2022 has resulted in a higher monthly income for annuity purchase deals, increasing around 50% in just 12 months. With interest rates also higher a predictable monthly income may now have a much greater appeal. With more phased retirement increasingly the norm, and incomes needing to last for longer, a balanced approach is generally advisable. Having a variety of income streams could be a more useful long term strategy, rather than committing to single retirement funding plans.

Changes to HMRC’s reporting expectations for self-employed workers have been announced and then put off for several years, but one change in place this year is that all self-employed workers must now align their tax reporting to HMRC to the end of the financial year. This responsibility of keeping on top of HMRC’s reporting requirements would be handled for employees by an HR department, but if you choose to become your own boss, it’s part of the broader obligations that self-employed workers have to manage., alongside making their own pension arrangements and having a safety net for sickness or holidays.

For updates on these issues and market activity that could affect your financial planning, please see our summer newsletter. We will continue to monitor the effects of inflation and other outcomes during the financial year, so our following newsletter will bring you the latest on managing your financial future.