Despite performing a U-turn on tax credits in his Autumn Statement, the Chancellor couldn’t resist dipping into the pension pot again to extract almost £1 billion.
Experts Warn The Spring Budget Will Be The One To Watch, Even Though The Autumn Statement Saw The Pension Changes Set Out Below
Autumn Statement Conjures Up Cash From Pensions
The Chancellor, recognised for being adept at generating revenue for the Treasury in clever ways, has helped balance the books by announcing a delay of six months for the increases to the auto-enrolment minimum contribution rates originally scheduled for October 2017 and 2018 respectively. It's expected to save £840 million in pensions tax relief.
Key Pension Announcements In The Autumn Statement
By way of a change, the Autumn Statement contained no major surprises for pensions. Surprisingly, no announcement was made on the reform of pensions tax relief, but the Treasury has confirmed this will be made in the Budget next Spring.
Pensions Tax Relief Consultation
The Government will publish its response in the March 2016 Budget.
Automatic Enrolment Minimum Contribution Rates
The Government will delay the next two scheduled increases in automatic enrolment minimum contribution rates by six months each, to align these changes with the start of the tax year. This will mean the increases scheduled for October 2017 and 2018 will be pushed back to April 2018 and 2019 respectively, saving the Treasury around £840 million in pensions tax relief.
Secondary Market For Annuities
The Government will set out further details on its plans to create a secondary market for annuities, including the framework for consumer protection, in its consultation response this December.
Basic State Pension
The triple lock, which means the Basic State Pension rises by the higher of earnings, inflation (RPI) and 2.5 per cent, will be maintained, ensuring the Basic State Pension will rise to £119.30 per week from next year.
Single Tier State Pension
The new full Single Tier State Pension will be set at £155.65 per week when it's introduced in April 2016.
The Government has reiterated it remains concerned about the growth of salary sacrifice arrangements and is considering what action, if any, is necessary. The Government intends to gather further evidence to inform its approach.
Inheritance Tax And Drawdown Pensions
The Government has confirmed it will legislate to ensure a charge to Inheritance Tax will not arise when an individual designates funds for drawdown but does not draw all of the funds before death. This will be backdated to apply to deaths on or after 6 April 2011.
Dependant Scheme Pensions
Legislation will be introduced to simplify the test that takes place when a dependant’s scheme pension is payable.
Following the introduction of the Single Tier State Pension from 6 April 2016, legislation will be introduced to enable the pension tax rules on bridging pensions to be aligned with Department for Work and Pensions legislation.
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