What George Osborne’s Autumn Statement Means For Pensions
George Osborne announced his autumn budget yesterday, with the usual back-and-forth arguments afterwards. There were further implications for pensions following a number of pension reforms over the last couple of years and we’ll explain just what the autumn budget meant for the pensions sector.
The Chancellor built on his announcements on pensions given at the last budget to further outline changes to the way pensions will work in the UK.
The main policy change that Mr Osborne announced was that anyone who dies before the age of 75 will be able to pass on their annuity income tax-free, a change from the status quo where a 55% levy is charged. This will, however, only apply in cases where annuity payments are made for the first time post-April 2015.
Similarly, it was revealed that savers will be able to pass any ISAs on to their spouse tax-free.
This all follows the announcement from the Chancellor in September that the 55% tax charge on uncrystallised funds at death would be removed and this change was confirmed in the statement. An often overlooked fact, however, is that the 55% charge is being replaced by a 45% tax to the fund recipient which will then go down to their marginal rate from 2016/17 onwards. If the benefit is not taken a lump sum, though, the recipient will be taxed at their marginal rate a year earlier.
One expert was quoted as saying that “annuities are now on a level playing field with drawdown as far as tax on death benefits is concerned,” and the news is certainly a welcome boost for the annuities market and shows that the government doesn’t plan to completely leave that market behind after next April.
No flat-rate pensions tax relief
One of the major things to come out of the statement was not a policy announcement, but rather a lack of one.
Many experts had predicted a flat-rate pensions tax relief following proposals from the Centre for Policy Studies earlier in the year and Pensions Minister Steve Webb had refused to rule out an announcement on this being forthcoming. There was no such announcement, however, perhaps with the election looming and/or because of the huge number of pension reforms already being put through parliament.
All in all, there seems to be no bad news for savers from yesterday’s statement. That will come as a relief to many given that some had expected pensions to be one area where the government could squeeze out some extra savings for recently announced budget increases elsewhere.
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