Pensions: What are the lifetime allowance, state pension and the triple lock?

A big rise in the amount some people can save for their pensions is expected in Wednesday's Budget.

The change is part of the government's plan to encourage people to work longer before retiring.

Ministers might also bring forward a planned rise in the state pension age, according to some reports.

Pension lifetime allowance

The pension lifetime allowance is the maximum amount of pension savings an individual can build up over their career without having to pay additional tax charges. The current £1,073,100 limit was due to last until 2026.

However, Chancellor Jeremy Hunt is expected to increase it to £1.8m.

The allowance applies to private pensions (both defined benefit and defined contribution). The state pension - a government payment - is not included in the calculation.

If the current allowance is increased, very few are likely to benefit. An analysis by financial firm LCP suggests about 1.3 million workers are currently on course to breach the cap - less than 4% of the UK workforce.

Annual pension allowance

The annual allowance is the maximum amount of money an individual can pay into their pension in a tax year without penalty. The annual allowance is £40,000 for the year ending 31 March.

Like the lifetime allowance, the annual allowance only applies to private pensions. If someone goes over the allowance, additional charges may apply.

The chancellor is also expected increase this allowance, possibly to £60,000.

Both allowances have been cut since 2010, raising about £8bn of extra taxes for the government according to the Institute for Fiscal Studies (IFS).

However, the government is worried that the reduction has led to some highly-paid people - like doctors - to retire early or reduce their hours.

By raising these allowances, the government hopes to persuade some to stay in employment - or even return to work.

Unlike private pensions, the state pension is a monthly payment made by the government to people who have reached the qualifying age and have paid enough national insurance contributions.

In November, the government confirmed that the state pension would go up by 10.1% - in line with September's Consumer Prices Index (CPI) measure of inflation.

From April 2023 payments will be:

The government says 12.4 million people currently receive the state pension.

Men and women born between 6 October, 1954 and 5 April, 1960 start receiving theirs at the age of 66.

But for people born after this date, the state pension age is gradually increasing to 67 by 2028 and 68 by 2046.

At a cost of £105bn, the state pension accounts for just under half the total amount the government spends on benefits.

Under the triple lock, the state pension increases each April in line with whichever of these three measures is highest:

The triple lock was introduced by the Conservative/Liberal Democrat coalition government in 2010.

It was designed to ensure the value of the state pension was not overtaken by the increase in the cost of living or the working population's income.

If they have no other source of income, those above retirement age may also be entitled to Pension Credit on top of the basic state pension.

Like the state pension, this benefit is also due to increase by 10.1% from April.

If you get Pension Credit, you may also be entitled to other financial support, including housing benefit, a reduction in council tax, or help with your heating costs through the Warm Home Discount Scheme.

People born before 26 September 1956 are also entitled to the annual Winter Fuel Payment.