Welcome to 2016

29 January 2016
With a number of changes to pension tax relief due to be implemented in April, and even more expected to result from the March Budget, 2016 is not a year where financial advisers will be looking for things to talk about with their clients.

Definitely happening

Tapered Annual Allowance

Clients with adjusted income of over £150,000 in 2016/7 will have a reduced Annual Allowance (AA) for pension savings.

Read more about Tapering annual allowance and transitional arrangements

Alignment of PIPs with tax year

All current Pension Input Periods (PIPs) will end on 5 April, and future PIPs will coincide with the tax year.

Everyone has a total AA of £80,000 for PIPs ending in 2015/16, plus any available carry forward from the 2012/13, 2013/14 and 2014/15 tax years.

Read more about Carry forward and the tapered annual-allowance

Reduced Lifetime Allowance

The Lifetime Allowance (LTA) is once again being reduced, this time to £1m. Fixed Protection is available at the current level of £1.25m providing no further contributions are made, or Individual Protection for those with funds above the new LTA but less than the existing level.

Read more about Lifetime-allowance

Almost certain

Changes to Pension tax relief

This is the biggie. At the time of writing, popular opinion seems to be leaning towards a flat rate of relief for pension contributions, however the Treasury's consultation ranged from the status quo to turning the relief structure on its head, from EET to TEE and they say that no absolute decision has been made yet.

Even if the result were to be a flat rate of relief, a number of questions remain - what would the rate be? how would employer contributions work?  what about final salary? -  to name a few.

Anybody's guess

The Financial Advice Market Review (FAMR)

Well OK we do know that the desired result is a more cost-effective advice service for those with smaller savings, but the problem has been around for a while and no one has sorted it yet.

Technology will undoubtedly play a part and we have been told that a return to some form of commission may be an option.

Royal London will, as ever, keep you up to date via our plain-English articles as and when the changes occur.

Watch this space.

About the author

Fiona Tait

Pension Specialist

Fiona joined the life and pensions industry in 1989. She is a Fellow of the Personal Finance Society, an Associate of the Chartered Insurance Institute and is currently Vice-President of The Insurance Society of Edinburgh. Fiona specialises in the areas of at retirement planning and pensions and divorce.

Last updated: 29 Jan 2016

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