24 November 2016
On 24 November 2016, Chancellor Philip Hammond has presented his first Autumn Budget Statement. The key points announced in relation to pensions are:
A reduction to the Money Purchase Annual Allowance from £10,000 to £4,000 per annum.
The Money Purchase Annual Allowance (MPAA) would be cut to £4,000 from £10,000 per annum. The Money Purchase Annual Allowance is the maximum annual amount individuals can contribute to a defined contribution pensions after having previously accessed a pension flexibly. The measure will be effective from April 2017 and the Government said it would consult on the detail.
For more information, please see our news article ‘Consultation to reduce the Money Purchase Annual Allowance’.
‘Scaling back’ on salary sacrifice benefits
Chancellor Philip Hammond is proposing to restrict the tax-free benefits offered by salary sacrifice schemes. The restrictions to the salary sacrifice regime being proposed are due to take effect from April 2017. This would mean most salary sacrifice schemes will be subject to the same tax as cash income according to HM Treasury. However, childcare vouchers, cycle to work schemes and ultra-low emission cars (those with CO2 emissions of up to 75g/km) would be exempt from these changes. He also announced that certain long-term arrangements would be protected until April 2021.
A clamp down on pensions ‘cold calling’
The Government reconfirmed its commitment to crack down on pensions cold calling. This is a move to give firms greater power to block suspicious transfers and make it harder for scammers. This follows an announcement from the Treasury on 19 November proposing a new regime under which all calls where a business has no existing relationship with the individual will be forbidden. The Government has revealed it will shortly publish its consultation paper to tackle pension scams.
State Pension triple lock to remain
In the Autumn Statement, it was confirmed that there will be no change to the State Pension triple lock but warned it could be cut in future due to rising longevity. Philip Hammond said the Government would keep its pledge by maintaining triple lock until 2020 ensuring that state pensions would continue to go up every year by inflation, earnings growth or 2.5 per cent which ever is the highest.