Posted on: 5th Feb 2014
George Osborne delivered the 2013 Autumn Statement on Thursday 5 December.
Thankfully there are no measures that directly affect privatescheme provision, despite the usual pre-Statement predictions about a reduction in tax-free cash or further cuts in tax relief.
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.
The Government Actuary’s Department (GAD) was commissioned to review the income drawdown tables and the underlying assumptions used to provide drawdown rates to make sure they continue to reflect the annuity market.
As a result of its findings, there will be no change in the basis on which the GAD tables are formulated.
The State Pension age (SPA) is currently scheduled to increase to age 68 some time between 2044 and 2046. This will ‘likely’ be brought forward to the mid-2030s and the SPA is likely to be increased to age 69 by the late 2040s.
The Statement also confirmed that the basic State Pension will increase in line with the triple lock on 6 April 2014. The triple lock is the higher of average earnings growth, inflation or 2.5% and will result in an increase of £2.95 per week for the full basic State Pension.
It was also announced that a new class of voluntary National Insurance will be introduced to allow current pensioners and people who reach State Pension age before 6 April 2016 to top up their National Insurance record and boost their entitlement to the State Pension.
Lifetime allowance – individual protection.
As we already know, the lifetime allowance is reducing from £1.5 million to £1.25 million from 6 April 2014. The Statement confirms that individual protection will be available to those individuals whose pension savings are worth at least £1.25 million on 5 April 2014. The value of their pension savings at that date can be protected up to a maximum of £1.5 million. Provisions are to be included in the Finance Act 2014. The draft Finance Bill will be published next week, so further details should be available then.
As we already know, the personal allowance for the 2014/15 tax year will be £10,000 (up from £9,440 for 2013/14); at the same time the limit for basic rate tax reduces from £32,010 to £31,865.
It was announced in the Budget in March 2013 that from 2015/16 onwards, the personal allowance will increase by the Consumer Prices Index (CPI) each year.
Rates and Allowances.
For the tax year 2014/15 the Personal Allowance will increase to £10,000 and the basic rate tax limit will be set at £31,865.
National Insurance contribution rates remain the same but the various limits are increased – e.g. lower earnings limit increases from £109 per week to £111 per week.
From April 2015, the employer’s National Insurance contribution will be abolished for those under the age of 21 and earning less than the Upper Earnings Limit.
Published 5 December 2013
The information provided is based on our current understanding of the Autumn Statement 2013 and associated documents and may be subject to alteration as a result of changes in legislation or practice.
We welcome the fact that the pensions industry has escaped relatively unscathed from the Chancellor’s statement.
The bringing forward of the likely date when the State Pension age increases to age 68 and the announcement that it will increase further to age 69 is disappointing to those affected but it makes pension planning all the more important.