Pensions in focus briefing: Spring Budget 2017
The Chancellor’s Spring Budget, delivered today, was noticeably light on pensions. In this briefing, we look at the changes that pension scheme trustees and employers need to keep in mind. Further news on the recent consultation on pension scams is expected later this spring.
Money purchase annual allowance: reducing to £4,000 from 6 April 2017
The money purchase annual allowance applies to members who have flexibly accessed money purchase pensions savings. The allowance is £10,000 at the moment, and the government recently consulted on reducing it to £4,000.
In a policy paper published today, the government confirmed that, having considered the responses to the consultation, it sees no reason not to go ahead with the reduction.
The Chancellor has now confirmed that the MPAA will reduce from £10,000 to £4,000 from 6 April this year.
The policy paper suggests that the legislation needed to reduce the limit will be included in the Finance Bill 2017, but that there will be no other changes to the way the allowance operates.
Lifetime ISA: available from 6 April 2017
The budget also confirmed that the Lifetime ISA (LISA) will be available from next month. To compliment this and other tax relieved saving, the Chancellor announced that the overall ISA savings limit will increase to £20,000 from the start of the new tax year.
Transfers to overseas schemes: new 25% charge
On a slightly different note, the Chancellor announced that the government is going to introduce a new 25% charge on transfers to QROPs. This charge, which will apply to requests to transfer made from tomorrow, is intended to catch people who are trying to reduce their tax liability by moving their pension wealth to another jurisdiction. As such, there will be exceptions where someone has a “genuine need” to transfer their pension. Transfers not originally taxed may become taxable if circumstances change in the 5 years following transfer. Likewise, tax deducted on transfer could be refundable if circumstances change in the following 5 years.
More information about the charge is available here. Again, legislation will be introduced in the Finance Bill 2017.
Finally, there is a proposal to link the tax registration process for master trusts to authorisation by the Pensions Regulator, with the aim of ‘boost[ing] consumer protection and improv[ing] compliance’.
We welcome the relative stability, in pensions terms, provided by today’s budget. Trustees and employers may wish to consider whether, and if so how, (without straying into giving financial advice) to communicate the reduction to the MPAA to members. Trustees may also wish to discuss the new charge on transfers to overseas schemes with their scheme administrators.
We would, however, note that this is a ‘transitional’ budget. The Chancellor has made it clear that going forwards there will only be one key fiscal event each year, this being the autumn budget. We will therefore wait, with interest, to see whether further measures are introduced then.