Philip Hammond presented his final Spring Budget this afternoon, with Budgets moving to Autumn; the first Autumn Budget will be later this year.
There was little in the Budget that affected pensions, with the majority of the announcements having already been made in the previous Autumn statement.
The triple lock and tax-free allowances
Phillip Hammond has reiterated his commitment to keep the triple lock on the state pension in place for the life of this Parliament, (that is, until at least 2020/21 or the Prime Minister engineers a snap election). The threshold before basic rates of income tax must be paid will also be as previously announced: £11,500 from 6 April 2017 with a commitment to raise this to £12,500 by the end of this Parliament. The higher-rate threshold remains as announced in December at £45,000 (source 1).
Pension savings and NIC changes
One announcement that could increase pension savings is the reduction in the amount of income, from £5,000 to £2,000, that can be derived from dividends directly from shares, (another route used by self-employed business owners to minimise tax).
When the new State Pension was introduced, this was opened up to self-employed people as well as employees; however, employees are currently paying more in National Insurance Contributions (NICs).To level the playing field, therefore, self-employed people will pay an additional 1% in class 4 NICs from 2018 and a further 1% (that is, 2% over and above today’s level) from 2019 (source 2).
Aligned with this, the Government is examining the affordability of state pensions and state pension ages in general. The results of the state pension age review, being conducted by Sir John Cridland, are due to be confirmed on 7 May 2017.
The Government has confirmed funding within the Public Sector for a number of free schools, including 140 additional schools, which was announced in this budget. This will have implications for local authorities and The Teachers' Pension Scheme, to ensure all employees are enrolled in the correct scheme at the right time with accurate information. The Government has also announced additional funding for social care - £2 billion over the next three years - that could also see an increase in the number of employees and employers in local authority schemes.
One final area that could impact on pensions is the announcement of a green paper on the funding of long-term care. This will be released later this year. One option that has been discussed in the press is the ability to allow tax-free withdrawals from crystallised funds to pay for care (source 3).