Spring Budget 2024: The key changes that could affect your employees and their pensions

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On 6 March 2024, the Chancellor Jeremy Hunt announced a range of measures in his Spring Budget. Here are the key changes we think you should know about – and what these might mean for your employees.

Watch our Spring Budget roundup

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Hear from Mike Ambery, Retirement Savings Director at Standard Life, on his take on the Spring Budget

National Insurance is cut for a second time

The Chancellor announced that he is cutting National Insurance (NI) again. This is the second time in 12 months that NI has been cut. In last year’s Autumn Statement, Class 1 NI was reduced from 12% to 10%. Today, it falls further to 8%, and this will come into effect from 6 April 2024. As a result, someone earning £30,000 a year will have an extra £29 in their pocket each month.

Whilst it might be tempting for employees to see this as extra spending money, they could consider using it to top up their workplace pension contributions. Even small additional contributions now could give their retirement a boost.  

For example, for someone earning £30,000 a year throughout their career from age 22 to 66, putting that additional £29 a month into their pension could lead to an additional £41,000 in retirement, not adjusted for inflation.

Pot for life plans to press ahead

The Chancellor repeated his commitment to introduce a pot for life system, which aims to make it easier for people to take their pensions with them when they change jobs.

In theory, the system would allow employees to have a single pension that follows them throughout their career. The idea is that it will prevent people from losing or forgetting their pension pots when they move to a new employer. 

Gail Izat, Managing Director for Workplace at Standard Life, part of Phoenix Group said: 

“The reiteration of a commitment to the introduction of a pot for life comes hot on the heels of the Government's Value for Money framework announcement and push for greater disclosure around investing in the UK, and should be viewed in the context of the wider Mansion House reforms. 

While pot for life could complement the current Government and regulatory push for fewer, bigger schemes, which could help to ensure customer outcomes are a central focus and underperforming schemes are required to act, a pot for life scheme is not a short-term fix. 

Its successful introduction requires a significant level of planning and preparatory work to overcome the high level of complexity that has been built into our pensions system in the UK over the many decades of constant change to regulation and legislation.”

New ISA = more investment opportunities?

The Chancellor announced a new “UK ISA” to encourage more people to invest in UK assets. This would give people an extra ISA allowance of £5,000 on top of any existing ISA allowances (currently £20,000). 

At the moment, there’s no confirmed launch date and the consultation closes in early June 2024 – so further details are still to come.

Pension plans are investments. They can go down as well as up in value and may be worth less than what was paid in.

Tax rules and legislation may change and someone’s individual circumstances and where they live in the UK will affect the tax they pay.

The information here is based on our understanding in March 2024 and should not be taken as financial advice. If you’re unsure please speak to a financial advisor.