What Will the Autumn Statement Mean for Contractor Pensions?

As the government confirmed its Autumn Statement for the 30th of October, some of the Labour Party's fiscal plans have become clearer.

Much of the talk revolves around the Chancellor, Rachel Reeves, looking to plug a £22b hole in public finances, with private pensions identified as a possible target for Reeves to recoup funds. Any changes to pension taxes could be significant due to the financial importance of private pension schemes to contractors who lack exposure to employer pension schemes.

Potential Changes to Contractor Pensions.

Pension Annual Allowance - The pension annual allowance is the maximum amount you can pay into a pension scheme yearly without incurring a tax charge. The annual allowance for the 2024/25 tax year is £60,000.

The Chancellor has already commented that this figure is too generous, so reducing it is a real consideration.

Tax-free lump sum - You can take 25% of your private pension tax-free as long as you meet certain conditions. Reducing or abolishing this amount would be challenging for the Chancellor, but it is a consideration.

Salary sacrifice employer pension contributions - Salary sacrifice employer pension contributions are a common and attractive option for contractors as they are currently an unlimited and efficient way of reducing income tax and National Insurance. However, limiting such contributions is another consideration and way for the government to generate income.

With several other options also on the table, it's unlikely that pensions will go untouched as part of the government's autumn statement.

Contractors Urged to Review Pension Arrangements.

With pensions firmly on the Chancellor's radar ahead of the autumn statement, we urge contractors to consider their pension arrangements.

Following the autumn statement, opportunities to plan for and maximise pension efficiencies could be limited, so contractors must act quickly to ensure they don't miss out.

At Champion, we have several regulated and independent financial advisor partners who can provide advice and guidance on pension schemes and contributions. For further information, contact the Champion Contractors team on 0161 703 2549 or email info@championcontractors.co.uk.

Alternatively, visit our website at https://www.champion-contractors.co.uk/ or follow us on LinkedIn.