News this week has been dominated by headlines about the numerous strikes taking place across the country, in bids to secure pay increases for junior doctors, teachers, rail and tube workers. The other big news this week, of course, was this year’s Spring Budget.
The Budget contained myriad measures impacting the reward and benefits industry, most notably around pensions, childcare, and both mental and occupational health.
Following much speculation around what the Budget would have in store for pensions tax relief, Chancellor Jeremy Hunt went further than expected, abolishing the lifetime allowance limit on tax-free pension contributions, as well as increasing the annual allowance from £40,000 to £60,000. The abolition of the lifetime allowance was intended to encourage employees who had reached this limit to remain in, or return to, work.
While some questioned how effective these changes to pensions tax will be in encouraging older workers to continue working, or return to the workplace after taking early retirement, other industry professionals welcomed the move. Among this group, the consensus appeared to be that enabling individuals to save as much as they desired – in keeping with the annual allowance limit – into a pension arrangement for retirement without the move for complex tax planning was a positive step.
Separately, removing the pensions lifetime allowance limit may make it easier for employers and trustees to set up new group life schemes, as lump sum death benefits written into pension arrangements will no longer count towards an individual’s lifetime allowance. This had previously been introduced under pensions simplification legislation in 2006.
However, while the over-50s cohort who are not currently in employment is significant, does focusing on this demographic mean many younger individuals could be overlooked when it comes to entering the workforce?
Continuing with the Budget’s theme of enabling more people to enter or remain in employment, Hunt’s extension of 30 hours’ free childcare to all children from nine months of age was widely welcomed. This move has the potential to significantly reduce the high childcare costs currently experienced by working parents, which have proved prohibitive for some and resulted in them leaving the workforce.
However, Hunt has been criticised for the speed at which this will be rolled out, with the first stage due to come into effect from April 2024. The funding for the full 30 hours will then be available to all children from the age of nine months by September 2025.
While this may seem like a lengthy rollout that won’t immediately help parents with the cost of childcare, this is primarily due to the need to ensure the childcare sector has the staff and capacity to accommodate the potential demand from so many additional families. Already, some nursery owners have questioned whether the government’s proposed funding will be sufficient to achieve this.
Only time will tell, therefore, whether these measures will achieve their aim of increasing the potential employment pool.
Other measures set out by Jeremy Hunt included:
- Spring Budget 2023: Freeze on fuel duty for 12 months
- Spring Budget 2023: Government to focus on mental health and musculoskeletal issues at work
- Spring Budget 2023: Scheme launches to help disabled people to access work and support
- Spring Budget 2023: Tax agents given access to payroll benefits in kind
Debbie Lovewell-Tuck
Editor
Tweet: @DebbieLovewell