Budget 2024: inheritance tax on pensions, IHT - and 5 changes the UK Autumn Budget makes to state pensions
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- Chancellor Rachel Reeves unveiled a £40 billion tax increase in her first Autumn Budget
- The budget aims to inject vital funding into education, healthcare, transportation, and housing
- But it raises questions about the implications for pensioners amidst rising taxes and public spending
In a bold first Autumn Budget as Chancellor, Rachel Reeves unveiled an eye-watering £40 billion increase in taxes, aiming to inject vital funds into education, healthcare, transportation, and housing.
While these measures signal a commitment to growth and stability, their ramifications extend far beyond immediate funding, and for the nation’s pensioners, the Budget carries both promises and challenges.
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Hide AdHere, we’ll explore five key ways the Budget announcement will impact pensions, shedding light on what retirees can expect in the coming years.
What does the Budget mean for pensioners?
As part of her Budget announcement, Reeves reiterated the Government’s commitment to the pension triple lock, telling the Commons the basic and new state pension will rise by 4.1% in 2025-26.
The increase will see the weekly benefit rise to £230.30 for the full new flat-rate state pension. However, with income thresholds set to remain frozen, an individual receiving just the state pension will be taxed on their income from 2027.
The Chancellor told the Commons: “The pension credit standard minimum guarantee will also rise by 4.1%, from around £11,400 per year to around £11,850 for a single pensioner.”
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Hide AdIt means that over 12 million pensioners will receive up to an additional £470 per year.
Adam French, senior personal finance expert at NerdWallet said: ”Many pensioners will be glad to hear that the triple-lock will be preserved and state pensions will be increased by up to £470, or 4.1%, next April.
“While this may be welcomed news, pensioners will also need to consider how other changes, such as the cut in winter fuel payment, will impact their personal finances.”
For families dealing with inheritance, inherited pension pots will be subjected to inheritance tax (IHT) from April 2027 under new rules announced by the Government.
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Hide AdAlongside changes to pension pots, the Chancellor confirmed that she was extending the freeze on thresholds until 2030 - the threshold freeze was due to expire in 2028.
Perhaps some of the most surprising ‘winners’ from the Autumn Budget are former mineworkers, who will see a 32% increase to their annual pensions, at an average increase of £29 per week.
The Government said it was hoping to overturn an “historic injustice” involving the pensions of former mineworkers, and that more than 112,000 former mineworkers will receive £1.5 billion of money kept from them.
An investment reserve fund set up using profits from the Mineworkers’ Pension Scheme in 1992, to provide a buffer in case it went into deficit, was due to be returned to the government in 2029. The fund, now worth £1.5 billion, will be handed over to the pension scheme.
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Hide AdEnergy Secretary Ed Miliband said: “We owe the mining communities who powered this country a debt of gratitude.
“For decades, it has been a scandal that the government has taken money that could have been passed to the miners and their families. Today, that scandal ends, and the money is rightfully transferred to the miners.”
Changes at a glance
- Increase in state pension: The basic and new state pension will rise by 4.1%, adding up to £470 per year for over 12 million pensioners.
- Preservation of the triple lock: The government has committed to maintaining the pension triple lock, ensuring pensions keep pace with inflation.
- Tax implications: The freezing of income thresholds will mean that some pensioners will face taxation on their state pensions starting in 2027.
- Changes to inherited pension pots: New rules will impose inheritance tax on inherited pension pots from April 2027.
- Support for former mineworkers: A 32% increase in pensions for former mineworkers aims to rectify historical injustices, benefitting over 112,000 individuals.
As the implications of Chancellor Rachel Reeves’ Autumn Budget unfold, we want to hear your thoughts! How do you feel about the impact on pensions? Join the conversation in the comments section.
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