The Chancellor delivered his Autumn Statement today with a particular focus on stability, growth and public services. In his Statement, the Chancellor sought to strike a balance between tax rises and spending cuts and also included measures which are designed to promote growth. As far as the pensions industry and employers are concerned, the headline announcements contained in today’s Statement include:

State Pension and Pension Credit
  • The triple lock on the State Pension will be retained. This means the State Pension will increase by 10.1% in April 2023.
  • Pension Credit will also increase in line with inflation from April 2023 (rather than in line with average earnings growth). This is to ensure pensioners on the lowest incomes are protected from inflation and do not lose some of their State Pension increase in the Pension Credit means test.
  • The Secretary of State for Work and Pensions will publish the Government’s latest Review of the State Pension age in early 2023.
Personal tax thresholds
  • The threshold for paying the 45p top rate of income tax will be lowered from £150,000 to £125,140 from April 2023.
  • Various personal tax allowances will be frozen for a further two years until April 2028, including the income tax personal allowance, the higher rate threshold, the main national insurance thresholds and the inheritance tax thresholds.
  • No changes to the pensions annual allowance and lifetime allowance were announced.
Employment
  • The National Living Wage will increase next year by 9.7% to £10.42 per hour from April for those aged 23 and over.
  • Work and Pensions Secretary, Mel Stride, has been tasked with carrying out a review into how to tackle Britain’s rising economic inactivity rates as more workers drop out of the jobs market. This follows an increase in economically inactive people of working age of 630,000 compared with pre-pandemic levels, which is contributing to the shortages in the labour market.
  • The Employers NICs threshold will be frozen until April 2028.
Review of EU Regulation and Solvency II
  • The Chancellor announced that remaining EU regulations in five growth industries – digital technology, life sciences, green industries, financial services and advanced manufacturing – will be reviewed by the end of next year.
  • Alongside the Statement, the Treasury has also published its response to the consultation on the reform of the Solvency II rules, which could unlock investment by cutting the capital buffers UK insurers are forced to hold.
Infrastructure
  • The Government has confirmed its plans to go ahead with a range of infrastructure projects, including proceeding with the construction of a new nuclear power plant at Sizewell C and completing HS2.

Comment

While pensioners will be seen as the winners from today’s Autumn Statement, there may be a sting in the tail as the Chancellor confirmed that the Government will publish the latest Review of the State Pension Age in early 2023. The full Autumn Statement notes that the Review “will need to carefully balance important factors, including fiscal sustainability, the economic context, the latest life expectancy data and fairness both to pensioners and taxpayers”. Does this mean that although the State Pension may be rising at a record rate future generations will need to wait longer to receive it?

Contact us

If you would like to discuss what any of these changes mean for your scheme or organisation please speak to your usual HSF adviser or contact one of our specialists.

Samantha Brown
Samantha Brown
Managing Partner (West) of Employment, Pensions and Incentives, London
+44 20 7466 2249

Rachel Pinto
Rachel Pinto
Partner, Pensions, London
+44 20 7466 2638

Michael Aherne
Michael Aherne
Partner, Pensions, London
+44 20 7466 7527

Tim Smith
Tim Smith
Professional Support Consultant, London
+44 20 7466 2542

 

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