We welcome the fact that no further significant changes have been made that affect the pensions industry.
The abolition of tax on annuities paid on death brings them into line with flexi-access drawdown funds paid on death.
However there are various parts of the Statement that are worth commenting on. Here's our take on them, with links if you would like more details.
Section 2.51 of HM Treasury - Autumn Statement 2014
From 6 April 2015, the personal allowance will increase from £10,000 to £10,600, £100 more than announced in the Budget. At the same time the amount subject to basic rate tax will decrease from £31,865 to £31,785. Income over £42,385 will now be subject to higher rate tax, a £520 increase from £41,865.
1.222 of HM Treasury - Autumn Statement 2014
As predicted in the press, for annuities that are set up on a joint life or guaranteed term basis, on the death of the annuitant, the beneficiary will receive the annuity payments tax-free. This applies if the first payment is after 6 April 2015 and the member dies before age 75. This brings their tax treatment into line with that of flexi-access drawdown funds on death.
The rules are also changing to allow joint life annuities to be paid to any beneficiary.
There was no mention in the Statement about dependant’s scheme pensions. We need to wait for the Finance Bill 2015 to see if these payments will also be paid tax-free.
Despite the hints given in earlier consultation documents, the Chancellor announced that tax relief will continue to be unavailable on pension contributions paid after age 75.
1.235 of HM Treasury - Autumn Statement 2014
The single-tier state pension due to start on 6 April 2016 will be at least £151.25 per week. The actual amount will be set in autumn 2015.
Published 3 December 2014
The information provided is based on our current understanding of the Autumn Statement 2014 and associated documents and may be subject to alteration as a result of changes in legislation or practice.