4 pension changes to watch out for in 2024

From a big increase in the state pension to a proposed shake-up of workplace pension rules, there are several changes on the horizon that could have a big impact on your retirement savings.

And with a general election looming and a spring Budget scheduled for 6 March, there could be more to come. 

Here we look at what pension savers need to know in 2024, including the changes you can make to help boost your retirement pot.  

1. The state pension is going up by 8.5%

If you receive the state pension, you’ll see a boost in your payments from 8 April 2024.

Those entitled to the full level of the new state pension will get £221.20 a week, up from £203.85 this year. This change means that pensioners will be £902 better off by the end of the 2024-25 tax year, taking their total income to £11,502.40.  

State pensioners who qualified before April 2016 and receive the basic state pension will see their weekly payments rise from £156.20 to £169.50. This amounts to a £692 increase in 2024-25, giving a total annual income of £8,814.

How much state pension you get depends on your National Insurance record, so you could get less than the headline rates (or more if you’ve built up substantial additional state pension).

• Find out more: have you been underpaid the state pension?

2. Pension credit is also going up

If you're on a low income, you might be eligible for pension credit, a means-tested benefit to boost your state pension.

In 2023-24, if you are over state pension age (66) and your income is less than £201.05 a week, pension credit will top you up to that amount. For a couple, the combined income figure is £306.85.

Like the state pension, the amount of pension credit you get will be going up from April.

For 2024-25, pension credit will top you up by an extra £17.10 per week (from £201.05 to £218.15). For couples, the increase is £26.10 per week (from £306.85 to £332.95).

This top-up is known as 'guarantee credit'. There is another part of pension credit known as 'savings credit.' You may be eligible for one or both.

Savings credit is payable to pensioners who reached state pension age before 6 April 2016. 

If you're eligible you'll get up to £15.94 a week (£17.84 if you have a partner). This amount is rising by 6.7% (CPI inflation in September 2023), so from April, you'll get up to £17.01 a week (£19.04 if you have a partner).

3. The lifetime allowance will be scrapped

The pensions lifetime allowance (LTA) is a cap on the amount you can save into your pensions without incurring a tax charge. It's being removed altogether from April 2024. 

Previously, you could save as much as you wanted into a pension, but if it exceeded a total amount (the lifetime allowance), you could be hit with a hefty tax charge. In 2022-23, the lifetime allowance was £1.073m.

While this was a high threshold, the LTA had been particularly impacting doctors and consultants working in the NHS who were quitting the workforce when their pensions neared or reached the threshold to avoid being hit with a big tax bill.

Although the lifetime allowance is being abolished, there will still be a cap (of £268,275) on the tax-free lump sum you can take from your pension.

In some cases, this might be higher if you had previously protected your lifetime allowance at a higher rate. Check with your provider if you're unsure.

• Find out more: Have you paid too much tax on your pension?

4. 'Pot for life' proposals will start to take shape

Each time someone changes jobs they’re enrolled in a new scheme chosen by that employer. This can lead to people accumulating many small pension pots, which can be difficult to keep track of.

As part of his Autumn Statement in November, the Chancellor unveiled plans to address this problem by introducing a 'pot for life', into which workers could ask their employer to pay contributions.

However, it could take years for this to become a reality.

In the meantime, you can make it easier to keep tabs on your pensions by choosing to combine them into one scheme.

• Find out more: Six questions to ask before combining your pension pots

The changes you can make to boost your pension

Help set yourself up for a comfortable retirement by taking the following steps now: 

• Make sure your information is up to date: Confirm that the details your pension provider(s) hold about you are correct by logging into your online account or checking your latest paper statement. Also, make sure you've completed a nomination of beneficiary form to indicate who should get your pension when you die.

• Trace lost pensions: We'll have around 11 jobs over our working life on average, which could mean you end up with 11 pension pots. If you think you’ve lost a pension, you can contact the government’s Pension Tracing Service. You need either the name of your employer or pension provider and they will help you find contact details.

• Protect yourself against scammers: Beware of anything that feels suspicious when dealing with your pensions. Scams involving pensions cost victims more than £26.4m between 2020 and 2022. Being contacted out of the blue for a free ‘pension review’, time-limited offers and the promise of guaranteed high returns should all ring warning bells. 

• Get a state pension forecast: How much state pension you get is based on your National Insurance (NI) record - you need 35 years’ worth of contributions for the full new state pension. Check your state pension forecast to find out how much you're likely to get and identify gaps in your NI record.

• Top up your state pension: If you do have gaps in your NI record, you can sometimes benefit from ‘topping up’ your state pension. This is done by buying voluntary NI contributions. Until April 2025, men born after 5 April 1951 and women born after 5 April 1953 can plug gaps going back to 2006.