Autumn Statement 2023: What are the key changes and how might these affect your employees?

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On 22 November 2023, the Chancellor Jeremy Hunt announced 110 measures in his Autumn Statement. Here are the ones you need to know about and what these changes might mean for your employees.

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Potential for a ‘one pension pot for life’

The Chancellor announced that he will consult on giving pension savers the right to have their contributions paid into their existing pension scheme when they start a new job. 

In essence, this would allow employees to have one pension pot that follows them whenever they change jobs, giving them ‘one pension pot for life’, rather than having to transfer or combine their pension pots every time they join a new company. So the potential reforms could spell big changes. 

The idea is that it will prevent people from losing or forgetting their pension pots when they switch jobs. Currently there’s almost £27 billion sitting in lost pensions – much of it in multiple small pots. In fact, it’s estimated that, without intervention, the number of these lost small pots could increase from 8 million to 27 million by 2035.

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

"While we wait to see the detail of the consultation, the idea of a pot for life would need careful thought given the practical considerations around implementation and the potential distraction from existing initiatives. 

"A pot for life might be appealing from a simplicity perspective as the pension could follow people from job to job but there are bigger priorities facing savers and the pension industry that we would tackle first. These include ensuring contribution levels are adequate to provide people with a decent retirement income, identifying ways to extend advice and guidance to those struggling to make decisions and implementing the government’s value for money framework that will empower people to determine whether their pension offers good value.”

Living Wage increase means more people can start saving for retirement

The Living Wage is set to increase to £11.44 from April 2024, and will now apply to those aged 21 and 22. This is likely to offer some welcome respite for those who have been struggling most with the rising cost of living.

The increase also means that more people will be pushed into the auto-enrolment eligibility threshold. And as a result, some employees might be eligible to join their workplace pension scheme for the first time. This is good news for people’s financial futures, because employers must pay into their employees’ pensions too – which could be a big boost to their retirement income.

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

“Confirmation that the Living Wage will increase to £11.44 and apply to 21 and 22 year olds for the first time from next April is welcome news and will offer some relief from inflationary pressures which hit the lowest paid hardest so hard over the 18 months. 

“It has the added benefit of bringing more people into scope for auto-enrolment as anyone earning more than £10,000 aged over 22 will become eligible. The pension contribution made is 8%, which is split 5% from the employee and 3% from the employer. Contributions aren’t based on total earnings but instead, people’s incomes above a minimum of £6,240.

“There are plans to extend auto-enrolment so that it applies from age 18 and from the first pound of earnings. While the detail of when this will kick in is still to be confirmed, these changes offer the potential to significantly boost people’s retirement outcomes. Pension saving won’t be right for all low earners or those who are really struggling right now but particularly in two income households, where one person may be earning significantly more, or where people have multiple lower paid jobs, workplace pension saving can be really valuable.” 

Triple lock commitment continues with a rise in State Pension

The Chancellor announced today that the government will stick to their pensions triple lock promise by increasing the State Pension by 8.5% to £221.20 a week. The rise will come into effect from April 2024. 

It will be a relief to many that the government is honouring their commitment to the triple lock – and it will provide a welcome uplift in people’s retirement income.

Lifetime allowance changes are still set

The lifetime allowance is the total amount someone can build up in all their pension savings in their lifetime without facing an additional tax charge when they take them. 

As a reminder, the Chancellor announced back in his Spring 2023 budget that the lifetime allowance would be abolished in April 2024. This change is still set to go ahead, with the Autumn Finance Bill 2023 to include legislation to remove the LTA and provide greater clarity.

Pensions 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 November 2023 and should not be taken as financial advice. If you’re unsure please speak to a financial advisor.