Tony Larkins, managing director of Beacon Wealth, talks about pension changes.

We have heard a lot about pensions in the past year from HM Government through the 2023 Spring and Autumn financial statements. 

The Lifetime Allowance – which limits the amount you can build up in pension benefits before paying tax – has been abolished. 

The Annual Allowance – the amount you can pay into a pension scheme each year before paying tax – has been increased. This means that individuals can pay up to £60k per year into their pension tax-free. For high earners, this facility was reduced dramatically, but the lower level has also increased to £10k from £4k. 

Ely Standard: Everyone should be aware of the recent changes says Beacon Wealth.Everyone should be aware of the recent changes says Beacon Wealth. (Image: BEACON WEALTH)

For most people, the maximum lump sum you can take from your pension in cash tax-free is 25 per cent, give or take, depending on your plan. However, for individuals with pensions above the Lifetime Allowance, the amount of tax-free cash you can take out remains the same. The larger your pension, the smaller the percentage you can take out tax-free. 

Another change of note impacts the benefits from someone’s pension upon their death. If someone dies, and their beneficiaries live overseas, some of the death benefit options may not be available to them.

If you have a large pension or are building towards one and are concerned about any of the changes mentioned above, you should speak to a financial planning specialist. 

Some advisers may encourage you to simply consolidate your pensions. Whilst that sounds straightforward and reduces the amount of administration involved, it’s rarely the best thing to do.  

You may have a range of benefits provided to you across your multiple pension plans, courtesy of your pension providers. You may not even know about the benefits on offer. 

However, by transferring or switching your multiple pensions across to one plan, you could lose access to benefits from the other plans that you really don’t want to lose. 

Sometimes, the benefits and fee structures of different plans can be confusing. This is why speaking to a specialist about your exact situation will help you prepare your pension, and your subsequent retirement, in the best possible way.