September 22nd, 2015

Yet another pension revolution?

For anyone who has spent the past 12 months getting to grips with the new pension rules, the news another ‘revolution’ may be round the corner will not necessarily be welcome. However, this now looks likely following Chancellor of the Exchequer, George Osborne’s, announcement of a new consultation on the UK’s pension regime.

There are no firm details as yet, but the Chancellor expressed a wish to simplify the pension system, observing: “Pensions could be taxed like ISAs – you pay in from taxed income and it is tax-free when you take it out. In between it receives a top-up from the Government.”

The Chancellor’s move to taper tax relief on pensions for high-earners had been well-flagged. From April 2016, for every £2 of adjusted income over £150,000, an individual’s annual allowance will be reduced by £1, down to a minimum of £10,000. Wealth planners have urged higher-earners to take advantage of the reliefs where possible up to the end of this tax year. Osborne did not, however, make changes to the salary-sacrifice regime, meaning higher-earners on the margin can still use this to bring them below the threshold.

The Chancellor chose not to provide greater clarity on the resale of annuities, deferring further details until the autumn. In the meantime, prospective retirees must continue to digest the new rules. The Chancellor may have ambitions to make the pension regime simpler but, for the time being, complexity reigns.

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