Other changes for pensions arising from the Autumn Statement came about more by proxy.
The savage cuts in both the dividend allowance (to £1,000 in 2023-24, and then £500 in 2025-26) and the capital gains tax allowance (to £6,000 in 2023-24, and then £3,000 in 2024-25) will leave investors and company owners with a hefty tax bill on their hands.
The Treasury predicts raising an additional £1.38bn in 2027-28 from the combination of these two measures.
This tax raid highlights the attractiveness of tax-efficient wrappers such as Isas and pensions, as they can shield dividends or gains from tax. Advisers will want to work with their clients affected by these changes to consider moving assets to these safe havens over the next few months before the allowances are cut, focusing on the higher-yield assets first.
The freezing of tax thresholds will also have a knock-on effect onto pensions. More people are predicted to pay higher rates of tax, both from freezing the higher tax rate threshold, but also by lowering the additional tax rate threshold to £125,140.
Some people may want to pay pension contributions to avoid being pushed into a higher tax bracket.
Finally, it is worth pointing out that those who do end up paying tax at a higher rate will see their personal savings allowance cut to £500 or completely to zero. This, again, will increase the attractiveness of pensions and Isas as an alternative tax-efficient way of saving for later life.
So, although it was a quiet Autumn Statement for pension headlines, the repercussions of the tax grabs and its effect on pensions will be keenly felt over the next few years.
Rachel Vahey is head of policy development at AJ Bell
Note: For tax years 2021-22, 2022-23 and 2023-24 the actual inflation rate for previous September have been used. For tax years 2024-25 and 2025-26 the Office of Budget Responsibility November 2022 forecast for the previous tax year have been used. Figures rounded to the nearest £100.
