Changes in the 2023 Spring Budget mean a pension is now an even more attractive way to save for retirement. Here’s what you need to know to make the most of yours.
Updates to allowances
The Spring Budget included initiatives to help professionals continue to work and contribute to their pensions, including those working in the medical industry:
- The pension annual allowance rose from £40,000 to £60,000
- The pension lifetime allowance (LTA) was scrapped (previously it was £1.073 million)
- The money purchase annual allowance (MPAA) rose from £4,000 to £10,000
These changes are designed to encourage higher earners to keep working when previously it was less of an attractive option because of tax penalties when exceeding the LTA. The MPAA increase makes it easier for people to return to work by increasing the amount they can contribute to their pension each year if they’ve already started drawing an income from it.
Tips to make the most of your pension
To keep your pension as healthy as possible for the long term, we’ve put together some top tips:
Maximise your contributions: whether it’s your NHS pension or personal pension, take advantage by contributing the maximum allowed each year and explore whether you can make additional voluntary contributions.
Work for longer: continuing to work beyond the time you planned to retire can help you increase your pension for greater financial security.
Consolidate your savings: if you’ve built up several workplace pensions, it can make sense to combine them into one pot, which not only cuts down on paperwork but could also mean you pay one set of management fees.
If you’d like to get guidance on your pension from someone who understands your profession, you can speak to a Specialist Financial Adviser from Wesleyan Financial Services.
Preparing for retirement
When it comes to retirement planning, a good place to start is by defining your key numbers. Think about when you’d like to stop working and how long you think your retirement will last. This will help you work out how much annual income you could need in retirement.
The Pensions and Lifetime Savings Association has calculated that single people will need a minimum annual income of £12,800 for retirement. This rises to £37,300 for a comfortable retirement. For couples, the minimum amount is £19,900, rising to £54,500.
Ultimately, how much you’ll need in retirement is dependent on a number of factors, including your goals for retirement and your lifestyle choices. Setting a retirement goal for the level that’s right for you can help you determine the steps needed to get there.
Your Specialist Financial Adviser can guide you through important issues – from living expenses to healthcare costs and other factors that may impact your retirement, including whether your pension is in good shape.