Autumn Statement brings stability for pensions
Since 2010 savers have had to get used to a regular diet of cuts to pension tax perks and mounting complexity. Radical new freedoms have been introduced, an overhaul of the pensions tax regime proposed and a secondary annuities market unveiled (before being abruptly scrapped) in recent years.
Pensions reform used to move at a glacial pace. No longer. While rapid changes in policy are sometimes welcome and necessary, they can also give you the sense of the retirement goalposts being constantly shifted.
No news = good news
So for savers, the big news in last week’s Autumn Statement was…no news! And in pensions, no news is generally good news.
Although the Treasury couldn’t resist tinkering with the annual tax-free allowance for those who have accessed their pension flexibly from age 55, Chancellor Hammond’s speech provided relative stability for savers.
Nonetheless, there were a couple of eye-catching announcements worth noting:
• Salary sacrifice tax perks curbed
Existing rules allow you to give up a portion of your salary in return for receiving benefits from your employer. Such schemes, known as salary sacrifice, are popular because they allow both you and your employer to save money – namely by not paying tax or National Insurance on the salary you give up.
Salary sacrifice has become increasingly popular in recent years, with everything from bikes to laptops and mobile phones offered by employers. Fearful of a potentially significant loss of tax revenue, the Treasury has decided to remove the benefits of salary sacrifice in most circumstances – meaning these benefits will be taxed in the same way as income.
The change will come into force in April 2017, although arrangements relating to pensions (including the provision of regulated financial advice,) childcare, the cycling to work scheme and ultra-low emission cars are excluded.
Salary sacrifice deals 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.
• Pensions scammers targeted
Following a campaign led by financial adviser Darren Cooke and backed by AJ Bell, the Government will also consult on banning pensions cold-calling as part of a wider clampdown on fraudsters.
In addition, policymakers plan to hand providers more power to block transfers to dodgy schemes, and make it harder for such schemes to be set up in the first place.
This will hopefully mark the beginning of a process to make the retirement market safer for all investors.
Senior analyst, AJ Bell