Speculation around what the Spring Budget might mean for people’s personal finances is rather more muted than the last time the Chancellor picked up his red box in November. After a tremendously turbulent time at the end of last year, the focus has been firmly on market stability.
As a result, we’re not expecting big changes to what’s already been announced. But the Budget has surprised us before, and it could once again. Given the tight squeeze on household budgets due to the cost-of-living crisis, all eyes will still be on the Chancellor’s masterplan.
Encouraging the over 50s to return to work
For those edging closer to retirement, there’s been talk of a drive to encourage people over 50 to stay in - or return to – the workforce. The pandemic led many to retire earlier than perhaps planned and now the Government has made it clear that it wants to encourage a migration back to work.
Our latest research* has found that more and more people are opting to continue work post 65 – some through personal choice, others through necessity – so further support of this would be welcomed.
On working into state retirement age, this is what our research found:
- 28% aged 65 to 69 are in some work or employment, and 13% aged 70 to 75 are in employment.
- 20% aged 55 to 65 want to continue working after retirement age.
- 63% expect to continue to work after their 66th birthday.
- Even when retired, 59% expect to continue working in some form.
- 24% have returned to work after retiring.
Potential changes to pension contribution levels and the state pension age
We could also see comments on raising the £40,000 annual limit on tax-free pension savings as part of this plan.
It will be telling too whether the Chancellor references any specific plans to help support those already retired, as this has been a big omission in recent Budgets. People in this group, who are relying on their savings, are some of the most affected by the rising cost of living.
Our research* found that the majority of over 55s (61%) have been impacted by the cost-of-living crisis, with 63% having seen a drop in their disposable income. Worryingly, more than half of those over 55 expect their financial situation to get even worse over the next 12 months.
Separately, there’s been speculation that the state pension age will be discussed, with rumours the Government could bring forward the proposed increase to age 68.
Don’t forget about changes coming up in the new tax year
Aside from the Budget itself, tax changes announced in November’s Autumn statement will come into play from 6 April. Millions will be subjected to a higher tax bill as a result of the changes to the 45% income tax threshold, plus cuts to the dividend allowance and capital gains tax annual exemption.
We’re here to support you
We’ll provide an update on Budget day of what’s announced and what any changes could mean for your finances.
We’d encourage anyone with concerns about what the changes could mean for their personal finances to get expert guidance, either through free online services or paid-for advice. If you already have an abrdn financial planner, get in touch with them. Or find out more about how our financial planning services could help you.
*The Great Retirement Study released by abrdn in association with The Wisdom Council – a survey of 2,000 UK adults aged 55 to 75.
The information in this article should not be regarded as financial advice. Information is based on our understanding in March 2023. Tax rules can always change in the future. Your own circumstances and where you live in the UK could have an impact on tax treatment.