.The Autumn Statement was announced on 22 November and the Government has made some significant changes relating to pay, pensions and National Insurance. So, what does it mean for you?

Autumn Statement – key announcements

1.  National Living Wage is increasing to £11.44 an hour for over 21s

2. Triple lock on State Pension to be honoured in full with 8.5% increase

3. Changes to National Insurance:

  • Standard rate of Class 1 National Insurance to be cut from 12% to 10% for employees
  • Class 4 National Insurance rate to be cut from 9% to 8% for self-employed workers, plus abolishment of Class 2 contributions

4.  ISA changes allow savers to pay into more than one ISA of the same type each year

5.  A new consultation on pension reforms to tackle small and deferred pension pots with a ‘pension pot for life’

Let’s go into detail about what these changes might mean for you.

1. National Living Wage increasing to £11.44 an hour for over 21s

The minimum wage (officially the National Living Wage) will increase by 9.8% to £11.44 an hour, effective from 1 April 2024. For the first time, this rate will also apply to 21 and 22-year-olds, giving this group a pay rise of over 12%.

If you’re on the minimum wage, this is likely to have a positive impact on your pension contributions. If you’re enrolled into your employer’s pension scheme, at £11.44 an hour, you’ll benefit from close to an additional £150 going into your pension over the course of a year.1

While this is a positive step, it’s still lower than the ‘real Living Wage’ which your employer may be signed up to. This rate is based on the cost of living and is currently £13.15 an hour in London and £12 an hour in the rest of the UK.2

2. Triple lock honoured with 8.5% increase

If you’re of State Pension age, you’ll be pleased to know that the Government have honoured in full their commitment to the triple lock. This is a protection that guarantees the State Pension amount will increase each tax year by either September’s inflation rate, earnings growth between May to July 2023, or 2.5% – whichever is highest.3

It was rumoured that the Government might be planning to go against the triple lock agreement. This would have been controversial as they previously committed to not making changes. However, the Autumn Statement confirmed that they’ll be honouring the triple lock, increasing the State Pension amount by 8.5% to £221.20 a week, equalling up to £900 more a year.

While this is good news for pensioners, it’s raised the question of whether this is fair for younger generations, who will foot the bill through National Insurance Contributions. There’s likely to be further discussion over the next months and years as to whether the triple lock is affordable long-term.

woman in glasses using a map and compass while sitting on the floor of her home

3. Cuts to rates of National Insurance

Standard rate of National Insurance to be cut from 12% to 10%

The Government has announced some significant changes to certain National Insurance (NI) rates. The standard rate of Class 1 NI on income between £12,570 and £50,270 has been reduced from 12% to 10%. On the average UK salary of £35,000, this will equal a saving of over £450 a year back into your pay packet.

While a change such as this would typically take place in April at the beginning of a new tax year, the Chancellor has announced the intention of pushing through urgent legislation to bring this into force from 6 January instead.

Class 2 NI abolishment and Class 4 NI reductions for the self-employed

The Autumn Statement has also brought changes to NI for the self-employed. Class 4 NI will be reduced from 9% to 8% on profits between £12,570 and £50,270 for self-employed workers. Class 2 NI – a flat-rate compulsory charge of £3.45 a week for self-employed people – will be abolished completely. The Government anticipates that together, these two changes will save over 2 million self-employed people an average of £350 a year. These changes will come into effect from 1 April 2024.

No impact to those over 66

It’s worth noting that as those at State Pension age (currently 66 but rising to 67 by 2028), won’t see benefit from a reduction in NI rates, as they’re already exempt from paying this.

4. Changes to ISA rules for savers

Several updates have been announced on the rules for Individual Saving Accounts (ISAs). Currently, you can only pay into one type of each ISA in a single tax year. But from April 2024, savers will be able to pay into multiple ISAs of the same type each year, removing a layer of complexity to the ISA process. The standard annual limit you can pay into all your ISAs in a single tax year without receiving a tax charge will remain at £20,000.

Other changes to ISAs coming into effect in April 2024 include:

  • Allowing a partial transfer of ISA funds between providers
  • Removing the requirement to reapply for an existing dormant ISA
  • Aligning the account opening age for any adult ISA to 18

For the full list of ISA changes, see page 90 of the Government’s Autumn Statement document.

5. Consultation on small and deferred pension pots with a ‘pension pot for life’

The Chancellor has announced a consultation on pension reforms in a bid to reduce the amount of small and deferred pension pots.

Currently, when you start a new job and if you’re eligible, you’ll be automatically enrolled into your employer’s pension scheme. This means if you’ve changed jobs multiple times in your career, you might have several small pension pots across different providers – which run the risk of becoming ‘lost’ if you don’t keep track of them.

The reforms will look to reduce the number of pension pots you have by giving you a legal right to tell your employer to pay pension contributions into an existing pension pot of your choosing. A ‘pot for life’.

While this is likely a positive step to reduce the chances of you losing track of your retirement savings, we believe there could be some potential risks, too. A ‘pot for life’ could be damaging to the role that employers play in pension saving. Workplace pensions can be used as a way to attract and retain employees, and many employers pay enhanced pension contributions to support this. The ‘pot for life’ concept could lead to lower employer contributions and support in the workplace.

Experts have also raised concerns that a ‘pot for life’ could mean people choosing a pension plan that doesn’t give them good value, leaving them worse off.

The consultation will likely take place over the coming months. 

couple seated on the floor of their home with a packaged suitcase, using a tablet together

A note on the Lifetime Allowance

In the Spring Budget in March 2023 the Government announced their intent to abolish the Lifetime Allowance (LTA) effective from 6 April 2024. The LTA is a limit on the total amount of pension savings you can build up across all your pension pots before you pay a tax charge when taking pension benefits from these savings. The current LTA is £1,073,100.

In the Autumn Statement, the Government has confirmed it will be going ahead with abolishing the LTA in April 2024. This will become legislation in the Autumn Finance Bill 2023. The Bill will add more clarification to some questions that have been raised, such as how removal of the allowance will impact taxation of lump sums and death benefits, pension protections, tax treatment for overseas pensions and more.

Look out for future articles from us where we will explore these changes and how it might impact you in more detail.

What hasn’t changed?

Ahead of the Autumn Statement being announced, you may have read reports of certain changes that were expected to happen. Two key points that were rumoured but have not been announced are:

  • Income tax reduction: there was talk of a potential reduction to income tax rates along with the reductions in National Insurance. This hasn’t surfaced in the Autumn Statement.
  • Inheritance tax reduction: there was an expectation that inheritance tax may be reduced, but this also hasn’t been mentioned in the Autumn Statement. Any change would have likely affected only a small proportion of the UK – only 3.73% of estates paid inheritance tax in the 2020-21 tax year.4

Make the most of the Autumn Statement pension changes

The announcements made in the Autumn Statement offer potential opportunities to take more control of your financial future. The reduction (and in one case, abolishment) of some NI rates will likely put money back into your pocket. This could be useful to support you with the current cost of living or allow you to potentially save more for both the short and long term.

Increase in the National Living Wage will benefit lowest earners, while the triple lock means a bumper increase if you’re claiming the State Pension.

For savvy savers, changes to ISA rules could give you more opportunity to diversify your saving portfolio. You could consider speaking to a financial adviser to discuss your options. You can find one on the Government-backed MoneyHelper website – there’s likely to be a charge for financial advice.

To find out more about the Autumn Statement, check out the Government’s Autumn Statement 2023.

Tax treatment depends on individual circumstances and taxation levels which may change. This information is based on our understanding of current taxation law and HMRC practice, which may also change.

Unless otherwise stated, all statements in this article are taken from the Autumn Budget announcement on 22 November 2023, and are accurate at time of writing. 

1. Figures based on an employee working 35 hours a week (for 52 weeks) on the National Living Wage and contributing the auto-enrolment minimum levels. Auto-enrolment pension contributions are 8% of a band of earnings (£6,240 to £50,270). 

 2. What is it? Data source, Living Wage Foundation, 24 October 2023.

 3. State Pension triple lock. Data source, House of Commons library, 6 November 2023.

4. Inheritance tax statistics: commentary. Data source, GOV.UK, updated 26 July 2023.


Insights In the news