Five things for pension holders to be aware of in 2022

2021 was a volatile year for the nation’s finances, and there were some important changes made, set to come into effect in 2022, that will impact people’s pensions in the year ahead.

Pensions can be the most valuable asset belonging to a household, and a lifeline during retirement, so it’s important that people are aware of how any changes or regulations might impact their pots or access to their pensions. 

With this in mind, I'd like to share five key things for anyone with a pension to look out for in 2022. 

1. Rising cost of living 

2022 has already seen inflation rising to more than five per cent, with further increases in the bank base rate a probable response. National Insurance Contributions are also set to rise from April 2022. Together with the possibility of further increases in energy costs and council tax bills, careful household budgeting will become increasingly important in 2022, especially for those on fixed incomes from pensions.

2. From triple lock to double lock 

With that in mind, State Pensions will increase by 3.1% in April 2022, due to a temporary ‘double lock’ which should be imposed for the 2022/23 tax year, preventing an increase in line with average earnings growth, which could have topped 8%. Although an increase in line with the Consumer Price Index is welcome, it is looking increasingly lower than the prevailing rate of inflation in April 2022, in addition to the other cost of living increases outlined above. Pensioners may need to tap into other sources of income and capital during 2022 – if available - to ensure their standard of living is not adversely affected.

3. Impending pensions tax raid 

There could be another Budget in March 2022. The Chancellor, Rishi Sunak, will continue to explore ways of raising additional Treasury revenue to help meet the costs of the Covid pandemic. Although pensions have escaped relatively lightly so far, the increasing cost of pensions tax relief could finally fall under the spotlight. Those wishing to make significant personal pension contributions in the current tax year may consider making those before the next Budget takes place.

4. New pension transfer rules  

For those individuals looking to transfer their pension in 2022, be prepared for it to take some time to achieve, depending upon where you are wanting to transfer to. You may have to answer a number of questions about the receiving pension scheme and provider, and/or be asked to attend a ‘scams guidance’ session with MoneyHelper (part of the Money & Pensions Service), before the transfer will be allowed to proceed. In some circumstances, though likely very limited, the transfer may not be allowed to take place at all. This is where the people in charge of your existing pension scheme believe that the receiving scheme is a scam.

5. Pension guidance delays 

If you are looking to access your Defined Contribution pension fund(s) from June 2022, expect your current pension provider(s) to strongly encourage you to undertake a free guidance session with Pension Wise first, before you are given access to your funds. Allow plenty of time to receive this guidance session – especially if it needs to take place on a weekend.