Last week, Jeremy Hunt has announced his plans to get the UK economy back on track and under control. Some of Hunt’s biggest changes came from within childcare and the pension lifetime allowance, in a bid to induce economic growth and get people back to work. We’ve decided to summarise everything you need to know about these two key areas to make sure you are up to date.

So, let’s start with childcare…

The government has faced growing pressure to provide more support to the childcare sector, particularly during the current cost-of-living crisis. Recent studies have uncovered serious childcare shortages, and with the cost of childcare continuing to steadily rise, there is no wonder that childcare was a central part of the Spring Budget.

What changes were made?

There were multiple changes across several different aspects of childcare, so here are the main factors you should be aware of.

  • Childcare ratios across nursery schools have been altered, with the number of children being cared for by one member of staff increasing. Due to concerns about safeguarding and quality of learning, this will be made optional and is subject to individual nurseries across England.
  • Low-income families have also been offered 50% more help with their childcare costs – the amount that parents on Universal Credit can claim is set to rise by around £300, the first increase in two decades.
  • The ages of those eligible for childcare have also been subject to revision, with plans to phase in changes on care for parents. There are three main stages:
    • From April 2024 – Working parents of 2-year-olds will get 15 hours of free care
    • From September 2024 – Children from 9 months will get 15 hours of free childcare
    • From September 2025 – All eligible under-5s will get 30 hours of free childcare

Now moving on to the Pension lifetime allowance (LTA)…

Before we go through the changes, here is a brief recap of what a pension LTA is. Your LTA is the maximum size you can allow your pension pots (workplace or personal) to grow to without paying extra tax. This includes payments from yourself, your employer, or any other third party, and references the maximum amount you can draw out from your pensions. If your collectively worth more than the LTA, it is likely you would face an extra tax charge, based on by how much you exceed the limit and how you take your pension.

So, what’s changed?

The maximum LTA figure is currently £1,073,100. However, the new budget has announced that the limit is being abolished completely from April 2024. This means that starting from that date, you can save as much as you want into your pension without incurring a tax charge. So, if you find yourself close to or already impacted by the previous allowance cap, you can boost your pension savings without the deterrent of paying extra tax. Or if you were planning to take your pension money soon and were over the previous allowance, you might now be able to avoid up to 55% in tax charges. If you are interested in learning more about your situation with regards to your pension specifically, ask your pension provider to give you an up-to-date calculation of your pension or review your pension payments.

There you have it!

You are now up to date on the basics of pension lifetime allowances and childcare changes from the new Spring Budget. If you’d like to find out more about the budget and what it means for you, feel free to look up the full list of changes.