There were no shock surprises in the Autumn Statement for pensions, but there are a number of points to be aware of:
- Automatic enrolment contribution rates – these are being phased in. It was announced that the date from which the next two increases in contribution levels will apply has been extended by six months. This will align the increase dates with the start of the tax year, which is intended to simplify the administration of automatic enrolment. It will also save the Treasury around £840 million in pensions tax relief. The table below sets out the new timeline for the phased contribution rates.
- Triple lock – the Chancellor reaffirmed the government’s commitment to the triple lock, which provides that state pensions will be increased by the higher of the rise in average UK earnings, the rise in inflation (CPI) and 2.5%.
- Single tier state pension – this comes into effect from 6 April 2016 and will be set at £155.65.
- Salary sacrifice – the government remains “concerned” and is considering if action is needed.
- Pensions tax relief – the result of the consultation on this will be announced in the budget on 16 March 2016.
- Secondary market for annuities – it was announced that the government would publish a response to its consultation on this shortly (this has now been published – see our blog here).
- Dependant scheme pensions – a limit applies on the amount of a dependant’s pension where the scheme member dies after 5 April 2006 having reached age 75, and was receiving pension or prospectively entitled to receive one. The test to determine the position on a dependant’s pension is being simplified.
- Inheritance tax and undrawn drawdown funds – legislation will prevent an IHT charge arising on unused drawdown funds on death.
- LGPS fund pooling – administering authorities have been invited to produce proposals for new pooled structures for the investment of funds. See our blog for further details.