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What the budget means for your pension

LONDON, ENGLAND - MARCH 06: Chancellor of the Exchequer, Jeremy Hunt, is seen outside 11 Downing Street with his ministerial box before delivering his Budget in the Houses of Parliament on March 06, 2024 in London, England. Chancellor Jeremy Hunt delivers his 2024 Spring Budget to Parliament. (Photo by Stefan Rousseau - WPA Pool/Getty Images)
Chancellor of the Exchequer, Jeremy Hunt, outside 11 Downing Street with his ministerial red box before delivering his budget in the Houses of Parliament. (WPA Pool via Getty Images)

Previous budgets have brought blockbuster announcements for people’s retirements and by comparison this one has been extremely quiet. Rumours of big cuts to inheritance tax were entirely absent and the biggest announcement – a cut in national insurance doesn’t affect pensioners, so they miss out on the boost to their incomes.

Most disappointingly there was no mention of reform to Lifetime ISAs. There has been speculation that government might look to cut the early access penalty on a LISA from 25% to 20% for first home buyers. There were also rumours that the limit on the value of a home that can be bought with a LISA would be increased from its current £450,000 level. There was no mention as to whether the penalty cut would extend to those saving for retirement, but we had our fingers crossed that it might. We think the LISA has the potential to really boost the retirement prospects of groups such as the self-employed who are not covered by auto-enrolment and don’t benefit from the employer contribution that comes with it.

However, despite much anticipation, there was no mention of LISAs at all in the speech which is hugely disappointing. It’s a missed opportunity to transform the retirement prospects of a group who because of irregular income patterns may be hesitant to save into a pension where you can’t access your money until at least age 55.

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Read more: What the budget means for you

However, there was some interesting pension detail announced. Most notably the government reiterated its commitment to the Lifetime Pension. Under this model the member has the opportunity to choose the pension their employer pays their contribution into. This means they can keep the same pension throughout their working life rather than potentially getting a new one with every new employer. This can do much to boost competition within the workplace pension market as well as dealing with the issue of lost pension pots whereby people lose track of pensions as they move employer. The Pensions Policy Institute estimates there is around £26bn of lost pension money washing around the system so it’s a problem in dire need of a solution.

Read more: Hunt cuts national insurance by 2p and freezes alcohol duty

The Chancellor also reiterated last week’s announcement that defined contribution pension schemes will be required to publicly disclose how much they have invested in UK companies.

Again, we need more detail but offering investors more transparency over what their pensions are invested in is a step in the right direction. Recent HL research shows that only one in three people actually know their pensions are invested in the stock market. These reforms have the ability to overturn this perception and really help people engage with their pension planning.

Today’s Budget may have been a relatively quiet affair, but the groundwork has been set for bigger changes ahead that have the potential to really help people take control of their retirement planning.

  • Helen Morrissey head of retirement analysis at Hargreaves Lansdown

Watch: UK Budget - National Insurance Cut to 8%, Hunt Says

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