Pensions in Autumn Statement 2015

Pensions in the Autumn Statement 2015.

State Pension

The flat rate state pension starts in April 2016 and the Chancellor confirmed that the initial flat rate state pension, for full 35 years qualifying credits, will start at £155.65 per week.  In addition, all those pensioners who are already drawing normal state pension plus State Second Pension and SERPS and Graduated Pension, will have the their full Basic State Pension entitlement increased to £119.30 per week.

Selling your pension annuity

The Chancellor confirmed that the finding of the consultation review for the ‘second hand annuity market’ are complete and the findings will be published in December but the ability to sell your annuity has been postponed 1 year until April 2017

Workplace Pension Auto Enrolment

The Chancellor confirmed in his report that he is postponing the minimum contribution level increases for pension payments from October 2017 and October 2018 to April 2018 and April 2019

What are the minimum contributions for workplace, auto-enrolment pensions?

Today – 2% of qualifying earnings funded by employee and employee contributions

October 2017 - 5% of qualifying earnings funded by employee and employee contributions – now postponed until April 2018

October 2018 - 8% of qualifying earnings funded by employee and employee contributions – now postponed until April 2019

Pension Tax Relief

There is currently a full consultation review, commissioned by the Government into tax relief offered on pension contributions.  The Chancellor confirmed in his report that any changes to tax relief on pension contributions will be announced in the next main budget in March 2016.  We believe there are two options that the Government could take:

1. Tax relief to be curbed even further for Higher Rate Tax Payers, possibly offering a flat rate of 25% across the board for all pension savings rather than in tiers at 20%, 40% and 45% depending upon how much your earn.
2. Tax relief could disappear entirely for all pension contributions after say April 2018.  We believe this is likely.  The US model of offering no tax relief on payments in but likewise not taxing people when they take their pension out as income, is easier to administer, it would also bring a welcome boost to government cash flows out finances today by not having to pay tax relief.  Administration simpler, government cash flow boost today.  Indeed, ask yourself the following question: Why has the government postponed the increases to Auto-Enrolment pension funding? Is it because they are looking to soften the blow to employees as they plan to withdraw tax relief?

Autumn Statement Key 'Pension and Investment' Points: