FOR ADVISERS ONLY

Autumn Statement 2015

George Osborne delivered the 2015 Autumn Statement on Wednesday 25 November.

Our view

It’s good news that the rumours of a halt to automatic enrolment have proved unfounded.

It’s also good news that a decision on pension tax relief changes has been put off until the Budget. This is an important decision and the Government needs to take time to get it right. However, they should have put on hold the reduction in the annual allowance for high income individuals due in April 2016 which will simply make the system more complex.

Thankfully there weren’t many measures included that affect pension schemes directly but inevitably there are some provisions worth commenting on.

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

Basic state pension

1.133 of HM Treasury - Spending Review and Autumn Statement 2015

The basic state pension will be increased by the triple lock in April 2016 to £119.30 per week.

New state pension

1.134 of HM Treasury - Spending Review and Autumn Statement 2015

The new single-tier state pension is due to start next April. The starting rate announced in the Statement will be £155.65, i.e. 5p above the level of the pension credit guarantee.

Automatic enrolment

3.29 of HM Treasury - Spending Review and Autumn Statement 2015

The Government will delay the next two scheduled increases in automatic enrolment minimum contribution rates by 6 months each, to align these changes with the start of the tax year.
Under previous plans minimum contributions would have risen from 1% employer, 1% employee of qualifying earnings, to 2%/3% from October 2017 and to 3%/5% from October 2018.

Now the rise to 5% will take effect from April 2018 and to 8% from April 2019.

Pensions tax relief

1.136 of HM Treasury - Spending Review and Autumn Statement 2015

The Statement confirmed that the Government’s response to the consultation on pensions tax relief will be published at Budget 2016. There was speculation before the Statement that the Chancellor might introduce measures to prevent high income individuals affected by the reduction in the annual allowance from 6 April from increasing contributions before the reduction applies. However, as no such measures were included it still makes sense for those affected by the reduction to review their contributions before 6 April 2016.

IHT and undrawn pension funds

3.36 of HM Treasury - Spending Review and Autumn Statement 2015

The Finance Bill 2016 will include provisions to ensure that inheritance tax will not be levied when a pension scheme member puts funds into drawdown but doesn’t draw all of the funds before death. This will be backdated to apply to deaths on or after 6 April 2011. No further detail on this change is available at the moment.

Secondary market for annuities

3.30 of HM Treasury - Spending Review and Autumn Statement 2015

The Government confirmed it will provide further details on the secondary market for annuities, including the framework for the consumer protection package, in its consultation response this December. Legislation will be included in the Finance Bill 2017.