Budget 2017 – what it means for your pension

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Philip Hammond before announcing pensions changes in the budget

The budget announcement saw pension allowances rise for the first time since 2010, but the status quo was largely maintained. Here’s what it could mean for your pension pot…

Despite the gloomy forecasts for the future of the UK economy, when it came to pensions there was a collective sigh of relief as the status quo was maintained in Wednesday’s budget.

Industry experts were united in their response in saying that ‘no news is good news’ as chancellor Philip Hammond decided to leave pensions untouched and set his sights elsewhere.

For private pensions there was even the announcement of the first rise in lifetime allowances since 2010.

The changes are as follows…

The budget and state pensions

  • State Pensions will be increased by 3 per cent from April 2018. For an old state pension this means an increase of £3.65 a week. For new state pensions, which came into effect in April 2016, the rise will amount to £4.80 a week.
  • Pension Credit Savings Credit will rise by 3 per cent. This is in line with the rise in the Consumer Price Index (CPI).

The budget and private pensions

The lifetime allowance for pensions will increase in line with the Consumer Price Index (CPI), rising from £1m to £1.03m for 2018-19.

However, it should be noted that for 2010-11 the maximum figure that you could save into a pension stood at £1.8m. Therefore, there has been a decline in maximum savings of 43 per cent over that period.

The £1.03m figure is the maximum you save while still being eligible for tax breaks. 

The chancellor had already outlined in last year’s Autumn Statement that the “triple lock” on the state pensions – the guarantee to annually increase the amount paid to pensioners by 2.5 per cent, or in line with inflation or wage growth, whichever is higher – will remain intact, although it is due to come under review in 2020.

Click here to access pensions advice for employers

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