These are interesting times for UK pensions. During its election campaign, the Labour Party promised to review the whole pensions system, and the King’s Speech at the opening of parliament on 17 July confirmed that the new government will introduce a new Pensions Scheme Bill.
UK Chancellor Rachel Reeves then launched a large-scale pension review to “boost investment, increase pension pots and tackle waste in the pensions system”. Described by Ms Reeves as a “big bang of reforms”, the review will look at issues such as:
- Making defined contribution schemes more productive by encouraging investment in the UK economy.
- Cutting down on ‘fragmentation and waste’ in the Local Government Defined Benefit Pension Scheme and looking at how it can be invested more productively (possibly meaning in the UK economy).
- Introducing legislation to encourage people to consolidate multiple small pension pots into one pot.
- Better options for savers when they reach retirement, to ensure they have proper pension drawdown options and not just a saving pot.
Requiring pension funds to invest more in UK markets could help re-energise the UK economy, but may mean less flexibility on which investments you can hold in your UK pension fund. There is no mention of a new lifetime allowance, a harmonised pension tax relief percentage, or reducing tax-free cash, so reforms such as these are very unlikely to be implemented over 2024. The autumn budget, though, could potentially include measures for 2025. Prior to the election, the Labour Party manifesto affirmed that the pensions ‘triple lock’ will be maintained.
British expatriates
While many UK changes do not directly affect British expatriates (unless they later return to UK), taxation can have a long reach if you own assets in the UK, and inheritance tax follows you around the world. Reforms to the pension system could impact everyone with UK registered pensions, including retired British expatriates.
Until a tax or pension change is announced, we can only speculate what will happen in the ever-changing world of politics. Manifesto and pre-election promises can be broken or adjusted, and reforms are only set in stone when the government releases the relevant new documentation.
We now await developments over the coming weeks, at the next budget, and whole parliamentary term. In the meantime, you may have a brief window to adjust your wealth management under current regulations, if you prefer acting on known rules rather than facing potential future changes.
Summarised tax information is based upon our understanding of current laws and practices which may change. Individuals should seek personalised advice.
Keep up to date on the financial issues that may affect you on the Blevins Franks news page at www.blevinsfranks.com
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