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Changes to how pensions are taxed from April 2023 and what it means for you

Date: 27 April 2023

In April 2023, the government changed how pensions are taxed. The amount of money that can go into your pension, has increased. 

This affects how much can go into your pension:

  • in a year, known as the annual allowance
  • over your lifetime, known as the lifetime allowance
  • once you’ve started taking your defined contribution (DC) pension, known as the money purchase annual allowance.

Here’s what’s changed and how it might affect you:

Things to think about:

1. Check whether these limits affect you

Checking your payslips, pension statements or online pension accounts will help you understand how much you’re putting into your pension at the moment. If you know that you were close to the old annual allowance limit of £40,000, you might be able to put more into your pension now. If you know that you were close to reaching the lifetime allowance of £1,073,100, you might also be able to put more into your pension now. If you are taking some of your pension but also saving into a pension, you also might be able to put a little more in now. And if you are a very high earner you may also find that you can now put a little more into your pension.

2. Think about what you’re aiming for

Its important to picture what your life might be like once you stop working, and how much that life could cost you. Your financial adviser will help you think about this. If you know how much you’ve put into your pensions, and what it’s likely to be worth when you retire, you can see whether you’re on track for the lifestyle that you want.

3. Get advice

We’d urge you to seek financial advice who, as your trusted partner, will guide you through the complexities to provide you with confidence that your financial future is on the right track.

If you do not have a financial adviser could can find one here.

If you just want to have some guidance, and are over 50 and have a defined contribution (DC) pension you can get free guidance session from Pension Wise, the government guidance service. The guidance is available face-to-face, or on the phone but it won’t tell you what you should do; that’s something that a financial adviser will do. Find out more at pensionwise.gov.uk