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The Budget on 15 March 2023 announced important changes to the Lifetime Allowance (LTA) and the Annual Allowance (AA) from 6 April 2023.

Many of the practicalities around the changes to the LTA are still to be worked through and, as you may have heard, a Labour win in the next general election could see the LTA brought back in some shape or form.

Below is a summary of the changes.
 
• The Lifetime Allowance (the total value of your pension benefits, other than any state pension, above which an additional charge applies) will effectively be abolished from the 2023/24 tax year.

• The maximum tax-free lump sum (also known as the maximum pension commencement lump sum) for those without earlier protections will remain at £268,275 and remain frozen at that level.

• The standard Annual Allowance (the limit on the amount of pension benefits you can build up in a tax year, above which additional tax applies) will increase from £40,000 to £60,000.

• The tapered Annual Allowance will now apply to those with an ‘adjusted income’ in excess of £260,000 p.a. (increased from £240,000 p.a.).

• The minimum tapered Annual Allowance will increase from £4,000 to £10,000 and, assuming it follows the current legislation, will taper down from £60,000 to £10,000 for ‘adjusted income’ between £260,000 and £360,000.

• The Money Purchase Allowance (the limit on the amount of money purchase contributions you can make in a tax year, after you have “flexibly accessed” any money purchase (defined contribution) pension savings, above which additional tax applies) will increase from £4,000 to £10,000.

If you think that you might be impacted by the above and are unsure of what decisions you should make in your best interests and suited to your unique personal circumstances you should seek detailed financial advice.  You can find an FCA approved adviser at www.moneyhelper.org.uk.

A number of widely reported economic and geopolitical issues have affected investment markets since the beginning of 2022, from significant increases in the costs of living to the uncertainty caused by the tragic conflict in Ukraine.  These issues have caused investment markets around the world to fall in value, which may have negatively impacted the value of your retirement savings.  The extent of any impact will depend upon the mix of investments that you hold.  Over the year to 5 April 2022, most global equity markets grew strongly, despite the recent dip, while bond markets fell slightly.

 

It’s not unusual for equities, or indeed bonds, to fall in value from time to time.  It is important to remember that pensions are long-term savings and in time they are expected to recover as they have done in the past.  However, it’s always worth keeping an eye on where your funds are invested by logging onto your CRISP account online and considering if your current level of investment risk is appropriate for your circumstances and retirement plans. 

 

For example, if you are invested in the Trustees’ default investment solution, the Aviva Pension MyM Mercer Growth/Balanced Risk Fund this invests in a range of asset classes so it is not reliant on the performance of one investment market.

The Trustees have added the above fund to the choices available to you within CRISP.  The Fund aims to seek income and long-term capital growth.  It invests to track, as far as possible, a benchmark index that filters companies listed on stock markets globally based on a variety of Environmental, Social and Governance criteria while meeting the EU’s regulatory requirements on climate change.  As part of the manager’s commitment to addressing climate change, companies that fail to meet their minimum standards in low carbon transition and corporate governance standards may be excluded from the fund; this includes companies involved in the manufacture of controversial weapons, companies that produce significant revenue from coal, and companies that are in breach of the UN Global Compact (on the adoption of sustainable and socially responsible corporate policies).

 

For more information, please refer to the fund factsheet in the Fund Research area of your CRISP account online.

CRISP invests defined contribution assets in a range of funds that are available on the investment platform provided by Aviva.  The platform is accessed via a long-term insurance policy between the Trustees and Aviva.  Aviva is regulated by the Financial Conduct Authority.  In the event that Aviva becomes insolvent, the Trustees are eligible for protection under the Financial Services Compensation Scheme (‘FSCS’).  This means that the Trustees may be able to make a claim (on behalf of members) for 100% of its policy value with Aviva in the event of a default by Aviva.

 

The Trustees have agreements in place with Aviva, who in turn has agreements with the individual fund managers that set out guidelines for the underlying investments held by each fund.  Day-to-day management of the investment arrangements, including the indirect management of credit and market risks, is the responsibility of the underlying fund managers.  The Trustees monitor the underlying risks by reviewing investment performance and risk through ongoing governance and quarterly investment reports.

 

At their last assessment, the Trustees were satisfied with the level of protection available to members’ assets and believe that risks to the security of assets are being minimised where possible.  The Trustees continue to monitor the situation regularly.

Discover how much you might spend during your retirement with Aviva’s spending calculator.

 

Take a look at Aviva’s Retirement Options brochure in the Documents section.

 

Check out Aviva’s retirement planner.

Get help from Mercer Harmonise Retirement Income Service - Link.

The default retirement age on your CRISP account is 65.  The State Pension age is now 66 and will be 67 by 2028.  Does your selected retirement age on your CRISP account reflect when you’re planning to retire?

 

If you’re invested in the default fund 
Your investments will automatically start de-risking eight years before your selected retirement date.  Choosing a retirement date that is too early could mean your pension starts de-risking too soon and you could miss out on higher investment returns.  Choosing a selected retirement date that is too late might leave your savings overly exposed to a sudden market fall just before you retire.

If you’re invested in self-select funds  
Remember, self-select funds do not automatically de-risk as they are not lifestyle funds, so you may not be invested appropriately as you get closer to retirement.  Your savings could fall in value at the worst time.  How would you feel if your savings fell in value by 10% or 20% immediately before your retirement date?  How would this affect your retirement plans?  It’s important to regularly keep an eye on your investments.

 

You can change your selected retirement date or change where your funds are invested by logging onto your CRISP account online or via the MyAviva app.

Scams can be hard to spot and are often disguised with credible websites, recommendations and professional looking documents.

 

Follow these simple steps to help protect from scammers:

 

1.       Reject ‘too good to be true’ offers that come out of the blue.  Cold calling is illegal and an offer of a free pension review is almost certainly a scam.

 

2.       Check that who you are dealing with is on the FCA register at register.fca.org.uk and contact the firm directly.  Call 0800 111 6768 to check they are authorised to give pension advice and check www.fca.org.uk/scamsmart for known scams.  If you don’t use an FCA-authorised firm, you’re unlikely to be able to access compensation schemes if anything goes wrong.

 

3.       Don’t be rushed or pressured to act quickly; time-limited offers are likely to be a scam.

 

4.       Get free independent, impartial information and guidance from www.pensionsadvisoryservice.org.uk or contact an independent financial adviser; you can find one at www.moneyhelper.org.uk.

 

Use the online reporting form on the ScamSmart site or on 0800 111 6768. 

You can also report it to Action Fraudon 0300 123 2040 or at www.actionfraud.police.uk.

 

Be ScamSmart with your pension.  To find out more, visit www.fca.org.uk/scamsmart.