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Autumn Statement – the impact on pensions

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Luke Carter

Luke Carter

Regulatory Advisor

examines the impact of the autumn statement on the pensions industry

24 Nov 2016

Philip Hammond gave his first (and last) Autumn Statement today. From next year budgets will be in the Autumn. For technical reasons the Chancellor will make a statement every Spring on the country’s finances and how these meet with the Office for Budget Responsibilities target, but will not make policy changes.

In terms of pensions the headline announcement today is that the Money Purchase Annual Allowance is to be cut in April 2017 from £10,000 to £4,000. This only impacts those over 55 who have already started to use pension drawdown from DC pots.

The Autumn Statement also included the widely announced banning of pension cold-calling and the government will announce a consultation on giving schemes more powers to stop transfers to suspicious schemes and a clampdown on abuse of small self-administered schemes by pension scammers (the dormant employer problem).

There has already been some confusion over salary sacrifice and pension contributions. The Treasury document confirms that pension contributions (and employer paid for financial advice), along with select other benefits will still be exempt. All other employee benefits in kind paid for by salary sacrifice will be taxed.

As declared in previous Budgets, personal allowances and higher rate threshold will go up, and be £12,500 and £50,000 respectively by 2020/21. The Chancellor today confirmed that these will rise with inflation after that, although the Chancellor of the day can increase this further.

The statement that the government will be looking at the impact of increased longevity on finances was taken by many to mean that the triple lock will only last until 2020/21. This could actually be more wide reaching and look at the impact on pension schemes and the impact of deficits on sponsoring employers as well and what measures the government can take to address the problem.

In terms of other savings, there were very few new announcements. The one announcement that may impact on pension schemes and their members is the announcement of a new National Savings and Investment 3 year investment bond with an interest rate of 2.2% open to everyone over 16. The minimum investment is £100 with a cap of £3000. The product will be available in Spring 2017 for 12 months only, so grab it whilst it lasts!

Luke Carter is Regulatory Advisor at Aquila Heywood, the largest supplier of life and pensions administration software solutions in the UK.

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