In his 2015 Autumn Statement the Chancellor made only a few new announcements affecting pension schemes, but a hint of more far reaching changes to come this year.
WHAT WE NOW KNOW…
Auto enrolment contribution increases have been delayed. In a move to simplify the process, and to save a reported £390m in tax relief in 2017/18, the planned increases to contribution levels for employers and employees of automatic enrolment schemes will be aligned to tax-years. Hence, rather than the increases happening in October, they will be delayed to the following April. The first increase will now be required in April 2018 rather than October 2017.
State Pension details
The Chancellor confirmed that:
• The single-tier state pension will be introduced in April 2016 at a rate of £155.65 per week (which is £8,093.80 p.a.) for those entitled to the full amount.
• The Basic State Pension for 2016/17 will be increased by the triple lock to £119.30 per week.
• State pension age will continue to rise in line with life expectancy, as planned.
Inheritance tax changes
Legislation will be included in the Finance Bill 2016 to ensure that a charge to inheritance tax will not arise when an individual dies with undrawn drawdown funds. This will be back-dated to apply to deaths on or after 6 April 2011.
Other minor changes
The Finance Bill 2016 will also include legislation to tidy up some of the current pension tax legislation: simplifying the test that takes place when a dependant’s scheme pension is payable and aligning pension tax rules on bridging pensions with DWP legislation.
…AND WHAT WE DON’T…
Reform of pensions tax relief
Following the consultation “Strengthening the incentive to save: a consultation on pensions tax relief” earlier this year, any proposed changes to pensions taxation will be announced in the 2016 Budget .
Following its comments in the Summer Budget 2015, the Government is still concerned about the growth of salary sacrifice arrangements. It is considering whether action is necessary and is gathering further evidence.
Secondary annuity market
The Government had previously announced a deferral to 2017 in implementing a secondary annuity market, which would allow pensioners with existing annuities to sell them to third parties. The Chancellor has now confirmed that details will be published in a consultation response this December, with legislation to be included in the Finance Bill 2017.
The Government has said it will consider legislating in a future Finance Bill to close down any further new schemes intended to avoid tax on earned income. It is not clear what impact this may have on any unfunded pension arrangements.
For more information, please speak to your Financial Advisor.