Wednesday 30 October marked the first Budget from a Labour government in 14 years. The Chancellor’s speech reflected on the legacy left from the previous government and the need to ‘invest, invest, invest’ in the UK. The Chancellor also re-iterated the government’s economic growth mission for this Parliament.
A number of tax and spending announcements were made in the speech, including:
- An increase of 6.7% in the National Minimum Wage from £11.44 to £12.21 per hour from April 2025 for workers aged 21 and over.
- Increases in employer National Insurance (NI) contributions by 1.2% to 15% from April 2025 and changes to thresholds (thresholds have been reduced from £9,100 to £5,000, although Employers Allowance has increased from £5,000 to £10,500).
- Increases in Capital Gains Tax from 10% to 18% for those paying the lower rate, and 20% to 24% for those paying the higher rate respectively for disposals made on or after 30 October 2024.
- Departmental budget increases.
- Increases in infrastructure spending, including for HS2.
Ahead of the Budget announcement, there was lots of speculation that there would be changes to pensions tax relief, particularly around introducing NI on employer pension contributions and changes to the tax-free lump sum. Some of these measures could’ve had significant impacts on members, employers and providers. However, on the day announcements related to pensions were relatively limited.
- Maintaining the State Pension Triple Lock for the duration of the parliament. The basic and new State Pension will increase by 4.1% from April 2025.
- Making pensions part of a person’s estate for inheritance tax purposes from 6 April 2027.
- Removing the exclusion from the Overseas Transfer Charge for transfers to Qualifying Recognised Overseas Pension Schemes in the European Economic Area (EEA) or Gibraltar from 30 October 2024.
As part of their investment agenda, the government are looking to work in partnership with the private sector, through the National Wealth Fund to catalyse over £70 billion of private investment. The recent Pensions Investment Review is looking to support this and we expect to see more government announcements on this topic over the coming months.
Overall, many of the speculated changes to pensions tax relief and other areas of pensions didn’t occur, but with the Mansion House speech coming up on the 14 November, and the interim report from the Pensions Review part 1 expected imminently, we anticipate more announcements around pension scheme investment over the coming weeks and months.
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