The Chancellor of the Exchequer, George Osborne, presented his seventh Budget to Parliament on 8 July 2015. This was the second Budget of 2015 following the earlier announcements on 18 March 2015 but perhaps more interestingly, it was the first full Conservative Budget since 26 November 1996 when John Major was Prime Minister and Kenneth Clarke delivered the Budget speech.
This Technical Briefing looks at the major changes announced as far as they impact on pensions:
- It was confirmed that the Lifetime Allowance will reduce from £1,250,000 to £1,000,000 for 2016/17.
- Transitional Lifetime Allowance protection will be available to protect those whose pension funds exceed this figure.
- The Lifetime Allowance will increase in line with CPI from 2018/19.
- From 2016/17, the Annual Allowance will remain at £40,000 but will be tapered down by £1 for every £2 of excess income over £150,000 (including the value of pensions savings) until it reaches £10,000 where an individual has income of £210,000.
- Pension Input Periods for annual allowance purposes will be aligned to the end of the tax year and there will be transitional rules for 2015/16 which will be effective from 8 July 2015.
- It has been confirmed that the tax on lump sum death benefits will reduce from 45% to the recipient’s marginal rate of income tax from 2016/17. However this will only apply when the lump sum is paid direct to a beneficiary. Where the recipient is, for example, a trust or a company and so does not have a marginal rate, the current 45% tax charge will continue to apply.
- The implementation of the secondary market for annuities has been deferred until 2017/18.
- The government has launched a consultation on pensions tax relief entitled ‘Strengthening the incentive to save: a consultation on pensions tax relief’. The consultation will run until 30 September 2015 and will look at whether to change the tax relief system for pensions.