The Chancellor’s mini-Budget made headlines not just in this country but around the world, and the markets are still digesting the potential effects across the broader economy. But what will it specifically mean for savers and investors? The experts have weighed in on the possible impacts on your retirement income, and we have chosen a selection to get a broad range of perspectives.

Helen Morrissey, senior pensions analyst, Hargreaves Lansdown:

There’s good news for additional rate taxpayers who are also savers because they should now benefit from the personal savings allowance for the first time (£1,000 for basic rate taxpayers, £500 for higher rate taxpayers).

Anyone who busts this allowance with cash outside an ISA will pay income tax on the excess, so former additional rate taxpayers will pay less – as will basic rate taxpayers. This is increasingly something people need to think about, as rising interest rates mean more chance of being pushed over the threshold.

There’s also a cut in dividend tax rates – which had been boosted to match the NI hike. This will come as a welcome change for business owners paid in dividends and for investors who hold assets outside an ISA. Meanwhile, former additional rate taxpayers will pay dividend tax at a lower rate too.

Both annuity and drawdown incomes are subject to income tax, so this will be a shot in the arm for pensioners. The 1% cut may only sound minor, but it can add up to serious savings with someone on a £25,000 income paying over £125 less per year.

For pension savers, the tax relief for basic rate taxpayers is going to be less generous – instead of getting an extra £20 for every £80 you contribute you will now only get £19 for every £81. The relief for former additional rate taxpayers will also fall. It means it’s a good idea to take as much advantage of your allowances as you can sensibly afford, while you receive relief at the higher rate.

The move could boost interest in Lifetime ISAs as the bonus stacks up in a similar way to pension tax relief while it’s at 20%. The fact pension tax relief drops to 19% could make LISAs an attractive option – plus income from a LISA is also tax free. LISAs have always been a good option for the self-employed with the bonus mimicking the effect of pension tax relief but this shift could prompt other groups to take a closer look.

Andrew Megson, executive chairman of My Pension Expert:

The government has been undeniably bold, yet pension policy has largely gone unmentioned. Perhaps not surprising, particularly as the UK’s pension minister was only appointed on Wednesday. However, it is vital that the new-look DWP hit the ground running and address the most pressing issues facing pension planners.

The greatest of which will be bringing inflation under control. Until it drops notably, people’s savings are losing value in real terms. And this has driven almost one in ten (7%) of adults aged 40 and over to ‘unretire’ in 2022. Confirming the reinstating of the triple lock would have provided some reassurance here.

Fast-tracking the long-awaited – and frequently delayed – pension dashboards programme should also be a priority. It would give pension planners greater insight into and control over their retirement savings. Let’s hope there is more to come in November’s Autumn Budget.

Steven Cameron, Pensions Director at Aegon: 

The government’s decision to cut the basic rate of income tax a year earlier than planned will mean millions can keep more of what they earn. However, income tax thresholds are currently frozen until 2026 and over time, wage increases mean people are paying tax on more of their income, and in some cases are being dragged into paying higher rate tax. This is a particular issue in the current climate as soaring inflation has accelerated wage increases.

While this is a welcome boost to take-home pay, for many it will fail to compensate for frozen income tax thresholds. Unfreezing these would be a much more powerful lever to support lower and modest-earning households. For anyone earning under £37,670, increasing the basic rate threshold by 10%, around the current rate of inflation, would offer a greater income tax saving than cutting the rate of income tax from 20% to 19%.

Aegon analysis shows that a 10% increase in the current threshold for paying basic rate income tax would save people earning above £13,827 around £250 over a year in income tax. This is based on the basic rate of income tax of 20% in England. Different income tax rates apply in Scotland, so individuals will have to wait to see if the Scottish Government makes equivalent changes.

Andrew Tully, Technical Director at Canada Life: 

There is a pension planning opportunity for those who can afford to make pension contributions in the current tax year. Additional rate taxpayers will get 45% relief, whereas next year’s contributions will only receive 40% relief. Similarly, basic rate taxpayers can obtain 20% relief on contributions this year, which will fall to 19% next year.Callum Stewart, Head of DC Investment, Hymans Robertson:

We welcome the government’s continued commitment to exploring how they can remove barriers to investing in illiquid assets. We believe some “illiquid” assets can improve member outcomes at retirement and as schemes become larger, the more traditional problems such as daily liquidity are likely to be less of a challenge. As with any investment, it will be critical to explore where these asset types can add most value for members through their pensions journey and not simply regard them as a panacea.

We acknowledge that more investment in illiquid assets investment by DC schemes could make a big difference in society given their potential to contribute to projects such as renewable energy. If we can also use this as a way to engage members in their pension savings – because they can physically see the good their money is doing – we can also potentially encourage them to contribute more to their pension savings. This will add to an improvement in overall long-term outcomes.

Jon Forsyth from LCP: 

The vast majority of DB schemes will find themselves in a better funding position this year than last, and today’s announcements are likely to reinforce that trend. If long-term interest rates continue to rise, deficits will tend to fall, and for some schemes, this could bring forward the potential to buy out or buy in some of their liabilities. The impact of other Budget measures such as the scrapping of the Corporation Tax increase will have a less clear-cut impact, as firms will get less relief than expected on pension contributions. But overall today’s statement is likely to lead to an improvement in DB scheme funding.

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