 |
| Newsletter |
No Shocks for Pension in Autumn
statement 2014
Below is a
summary of the key announcements in this years autumn statement:
No change to pensions tax relief or to the tax-free
lump sum
Against a background of gathering political momentum
for a widespread review of the pensions tax regime, none was announced. This
may prove little more than a reprieve until after next year’s general election,
but it is welcome nonetheless. Similarly, the 25% tax-free lump sum remains
unscathed.
Level (tax) playing field on spouse’s annuities and draw-down – but not scheme pensions
As widely trailed, where an annuitant dies before age
75, there will be no income tax on any resulting dependant’s annuity. This
change will apply to the first payment after 6 April 2015, even if the
‘original annuitant’ died before that date. The tax rules will also be changed
to allow a joint life annuity to be passed on to any beneficiary, with the same
income tax treatment. These changes bring annuities into line with unused draw-down funds. However, there is no such easement for dependants’ scheme
pensions from defined contribution (DC) or defined benefit (DB) arrangements.
Individual savings accounts (ISAs)
The ISA limit for 2015-16 will increase to £15,240.
More significantly, from today, when a married ISA-holder dies their spouse
will be able to retain the tax advantage on ISAs they inherit.
State pension
The Basic State Pension payable from April 2015 will
increase by 2.5% (£2.85 a week) to £115.95. The standard minimum income
guarantee within the Pensions Credit will match the cash increase, taking the
single tier State Pension – payable to those reaching State Pension Age from
April 2016 – to at least £151.25 a week in 2015-16 terms. The actual amount
will be set in autumn 2015.
Pensions and means-tested benefits
When determining entitlement to means-tested benefits
in ‘retirement’, uncrystallised benefits and draw-down funds are considered as
if they were delivering an income. This amount will be determined as 100% (it
is currently 150%) of the equivalent annuity, or the actual income taken if
higher.
Pensioner bonds
From January 2015, pensioner bonds – intended to help
pensioners hit by low savings interest rates – will be available. The interest
rates will be confirmed on 12 December 2014. Bonds are expected to be
restricted to maximum holdings of £10,000 and will be available only to those
aged at least 65.
Income tax and National Insurance thresholds
The Income Tax personal allowance will increase to
£10,600 from April 2015. The basic rate limit will be £31,785, with the higher
rate (40%) threshold increasing to £42,385.
The National Insurance upper earnings limit will
increase to stay in line with the higher rate threshold. The basic, higher and
additional rates of Income Tax for 2015-16 will remain at their 2014-15 levels.
It is not clear whether the earnings trigger for auto enrolment will continue
to be aligned with the personal allowance. The Government recently consulted on
four options for setting this limit.
In2Matrix (UK)
Limited is an appointed representative of In2Consulting Limited,
which is
authorised and regulated by the Financial Conduct Authority.
