
Budget Pension Changes Affecting Members of the Dentsu International Aegon Pension Scheme
As widely trailed in the press, on Wednesday 15th March 2023, the UK Government’s latest Budget established significant changes affecting private pensions. We are pleased to show our summary of the important changes.
This webpage can be read in PDF format by clicking the following: UK Budget Changes – March 2023
Should any questions arise, we invite you to contact us via e-mail to: DentsuPensions@pattersonmills.com.
Pension Rule Changes
These are wide-ranging changes, hence this Pension Update for all members of the Dentsu International Aegon Workplace ARC SIPP Scheme (the “Aegon Scheme”), administered and advised upon by Patterson-Mills.
This update shows both our summary of the changes, followed by specific recommendations in connection with your pension contributions to the Aegon Scheme.
The Central Theme
This is around the abolition of the pensions Lifetime Allowance (LTA), with effect from 6th April 2023, the start of the new UK Tax Year. The LTA has been with us since introduced first on 6th April 2006!
As you may remember, the LTA – along with the Annual Allowance (AA) – has seriously limited the ability of many individuals to accrue pension funds during periods of higher earnings. This has been financially harmful to many, especially disadvantageous to those who may have significant income fluctuations during career periods which may not necessarily be long-term earnings.
In addition, a significant increase in the AA has also been implemented.
Who is Likely to be affected?

- Those whose pension contributions have been limited due to any of the following:
- The tapered annual allowance (tapered AA) of any amount between £4,000 and £40,000 – due to their total taxable income (from all sources) being above the Adjusted Income level of £240,000 (2022/23).
- The standard annual allowance (AA) of £40,000 (2022/23), where a higher contribution would have been desirable (e.g. using bonuses or contractual amounts by employment).
- The money purchase annual allowance (MPAA) of £4,000 (2022/23), where anyone has taken some taxable drawdown pension income, in excess of their tax-free cash.
- Those who have previously reduced or stopped making pension contributions, due to the limitations of the Lifetime Allowance (LTA), including those that may have already used the existing LTA in full.
- Those who have any of the HMRC Protections (Fixed, Enhanced or Individual) in place and may have rights to Tax-Free Cash greater than standard amounts. This includes those who have previously been prevented from transferring their Fund to other schemes, under the threat of losing Enhanced Protection.
What are the New Changes?

Lifetime Allowance (LTA) Tax Charge
This will be removed from 6th April 2023 and will be entirely abolished from April 2024 in the Finance Act. This effectively means you can pay as much as you want into a Pension.
Pension Annual Allowance (AA)
Raised to £60,000 pa (from £40,000 pa) from 6th April 2023. To this, the usual carry forward rules also remain in place, which allows up to the last 3 tax years of unused allowances to be invested in addition (based upon the AA of each of those years).
Tapered Annual Allowance (TAA)
To be increased back to a minimum of £10,000 pa (from £4,000 pa) from April 2023. This applies to those earning between £260,000 and £360,000 total taxable income (usually including all Employer pension contributions). The reduction from the new £60,000 standard AA remains for individuals with total taxable income above £260,000 lose £1 of the standard AA for every £2 of total taxable income above it. Once total taxable income reaches £360,000, no further deductions are made, hence the £10,000 minimum tapered AA.
Adjusted Income Threshold
In line with the TAA change above, this is to be increased from £240,000 to £260,000 from 6th April 2023.
Money Purchase Annual Allowance (MPAA)
Applies to those who have taken some Pension benefits already (known as flexibly accessed rights). From 6 April 2023, this is to be £10,000 per annum, up from £4,000. This means that if you have already accessed your pension benefits, you can now invest up to £10,000 pa to a pension.
Tax-Free Cash Maximum is Frozen
By reference to the current LTA of £1,073,100, the existing 25% of fund calculation that equates to £268,275 is to become the new fixed limit, regardless of fund size in the future. For those the funds under the current LTA, the limit will remain 25% of their pension fund(s).
For those benefits / funds where HMRC Protection applies, their higher maximum tax-free cash amount will be protected.
HMRC has also confirmed that anyone with its Fixed Protection, or Enhanced Protection, in place as at 15 March 2023, will be able to make pension contributions from 6 April 2023 without losing their existing protected tax free cash amount.
Individual protection could also allow a higher TFC amount, but this has not been specifically mentioned in any documentation so far. For confirmation that those with any of the individual protections will also retain higher TFC rights, we’ll have to wait for the detail in the Finance Bill. Contact us for further information in due course.
Key Takeaway Points
- Those opted-out due to LTA limitations, or who have reduced their pension contributions due to AA limits, should consider opting-in or increasing pension contributions.
- For those that have opted-out in the last few years (usually due to LTA limitations) there will be unused AAs for the previous 3 tax years that can be calculated. This creates more generous contribution limits to help “catch-up” for those lost years.
- Those paying 40% income tax or higher, have a great incentive due to tax savings.
- For all those under age 75, who have taken retirement benefits already and yet also have taxable earned income now, investing into a pension up to £10,000 per year could be highly beneficial.
- Making pension contributions is also a method of extracting money from one’s taxable estate, potentially reducing Inheritance Tax for those under age 75 and able to make contributions.
- Unrestricted tax-free returns, totally tax-free for income and growth inside your pension fund, makes pension contributions especially attractive for:
- Anyone paying income tax and also those that pay no tax!
- Those with taxable earnings at or above £125,000, from where 45% income tax will now apply.
- Those with total taxable incomes between £100,000 and £125,400 – at the higher level their whole Personal Allowance for tax-free earnings is reduced to zero. Hence, giving up income for pension contributions represents income tax relief of 60% for every pound contributed down to £100,000 earnings.
Annual Pension Contribution Limits From 6th April 2023
- Up to £2,880, or 100% of earnings, for those without any taxable income and 20% is paid by HMRC to the pension!
- Up to £60,000 for those with total taxable income between £60,000 and £200,000 (‘threshold income’).
- Up to £60,000 for those with total taxable income in excess of £200,000, where the addition of Employer pension contributions takes the total amount (called the ‘adjusted income’) to no greater than £260,000.
- Between £10,000 and £60,000 for those whose annual total taxable income (including employer pension contributions) is between £260,000 and £360,000. This AA limit is tapered down by £1 for every £2 between these income levels.
- Up to £10,000 for those whose annual total taxable income (including employer pension contributions) exceeds £360,000.
General Descriptive Terms
- The AA is the pensions Annual Allowance (£60,000 pa 2023/24), which is the maximum amount of pensions savings an individual can make each year with tax relief without incurring a tax charge.
- The MPAA is the Money Purchase Annual Allowance (£10,000 pa 2023/24) and is a reduction to the AA for individuals who have flexibly accessed their money purchase pension savings.
- The tapered AA is a reduction to the AA for individuals with income above set levels. An amount of £1 of AA is lost for every £2 of taxable income (including employer pension contributions) above £260,000. The maximum reduction is £50,000, making the minimum tapered AA £10,000 in 2023/24.
- The LTA is the pensions Lifetime Allowance, which is the maximum amount of tax relievable pension savings an individual can benefit from over the course of their lifetime. Individuals may contribute to their pension over these limits, but they were subject to a tax charge on the amount above the allowance (2021/22, now ceasing for 2022/23 onwards).
- The LTA excess was taxed either at 55% where taken as a lump sum, or at 25% where taken as pension. Most individuals were subject to the standard LTA.
- When the LTA was introduced in 2006, and each time it has been reduced since 2012/13 tax year, protections have been offered to safeguard individuals who had already built-up significant pension savings on the expectation of a certain level of previously more generous LTA.
- HMRC will ensure that nobody will face an LTA charge from 6 April 2023. At a future fiscal event, the government will make the necessary changes to entirely remove the LTA from pensions tax legislation itself.
- Consequently, this measure also removes the need for individuals to rely on protections from previous decreases to the LTA, other than tax-free cash/PCLS amounts.
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Disclaimer
This webpage and supporting PDF documentation are guides only, not investment advice, which are based upon Patterson-Mills Financial Planning’s understanding of applicable legislation, English Law and current HMRC practice as at 6 April 2023. It is provided solely for general consideration. The information regarding taxation is based upon our understanding of current legislation, which may be altered and can vary depending upon your individual circumstances. Patterson-Mills Financial Planning takes no responsibility for action taken based on the contents of this document. Whilst every effort has been made in the preparation of this guide to make sure that the information is correct at the time of publication, please be aware that some details may be subject to change.