FOR ADVISERS ONLY

2016 Autumn Statement

Philip Hammond delivered his first (and last) Autumn Statement on 23 November 2016

Our view

Cutting the money purchase annual allowance flies in the face of efforts to make retirement more flexible. As soon as someone draws any taxable income using the pension freedoms, the amount they can save in a money purchase pension would be slashed from £40,000 to £4,000. This will have a profound impact on their ability to go on working and contributing worthwhile amounts to a pension. Starting to draw taxable pension cash becomes even more of a cliff-edge than at present. We should be trying to make combining work and drawing a pension easier not harder.

The ban on pensions cold calling needs to be introduced swiftly and be as comprehensive as possible. It needs to include unsolicited texts and emails as well as phone calls, and must cover a broad range of pension and investment cold calling. The consultation must be followed by swift action.

Here's our summary of the changes with links to Treasury documents if you would like more detail.

Income tax

4.5 and 4.6 of HM Treasury - Autumn Statement 2016

The personal allowance will increase to £11,500 from 6 April 2017 and the point at which the higher rate of income tax will apply will increase to £45,000 from 6 April 2017.

By the end of this parliament the government will meet its commitment to increase the personal allowance to £12,500 and the point at which the higher rate of income tax will apply will rise to £50,000.

Pensions

Money purchase annual allowance

HM Treasury - Reducing the money purchase annual allowance: consultation

The money purchase annual allowance will be reduced from £10,000 to £4,000 from April 2017. The aim of this change is to minimise the recycling of pension savings. The government are consulting on the detail of this.

Pension scams

3.42 of HM Treasury - Autumn Statement 2016

A consultation on the options for tackling pension scams including pensions cold calling will shortly be published. It is hoped this will give firms increased powers to stop suspicious transfers and abuse of small self-administered schemes.

Salary exchange

4.13 of HM Treasury - Autumn Statement 2016

From April 2017 the income tax and National Insurance benefits of salary exchange schemes will be removed for some arrangements. This change will exclude arrangements in respect of pensions as well as advice, childcare, Cycle to Work and ultra-low emission cars. Arrangements in place before April 2017 will be protected until April 2018 and arrangements for cars, accommodation and school fees will be protected until April 2021.

Foreign pensions

4.21 of HM Treasury - Autumn Statement 2016

The tax treatment of foreign pensions will be more closely aligned with UK pension tax rules for UK residents. Foreign pensions and lump sums will be taxed in the same way as UK pension schemes for anyone returning to the UK. The government will also close specialist pension schemes for those employed abroad to new savings.

Protection

Insurance premium tax

4.40 of HM Treasury - Autumn Statement 2016

The rate of insurance premium tax will increase from 10% to 12%. This increase will take effect in June 2017.

Savings

Life insurance policy part surrenders and part assignments

1.4 of HMRC/HM Treasury - Autumn Statement 2016: tax updates and technical changes

As expected following the consultation, the government will legislate in Finance Bill 2017 on the disproportionate tax charges which can arise on some gains from life insurance policy part surrenders and part assignments. This will allow applications to be made to HM Revenue and Customs to have the charge recalculated if an alternative calculation gives a lower tax charge. This change will be effective from April 2017.

ISAs

4.18 of HM Treasury - Autumn Statement 2016

It was confirmed the ISA limit will increase from £15,240 to £20,000 in April 2017.