Autumn Statement 2016

Published: 24 Nov 2016

UK Chancellor of the Exchequer, Philip Hammond today delivered the last ever Autumn Statement, where the concept has now been abolished, and replaced by an Autumn Budget.

In the future, the Chancellor will instead deliver a Spring Statement in response to statistics issued by the Office of Budget Responsibility, but this will not contain any fiscal measures.

This will certainly assist the Pensions Industry in its planning, by ensuring that large scale measures are only announced annually.

You can read the entire speech here.

Measures announced which directly impact the Pensions Industry included:

 

  1. Money Purchase Annual Allowance (MPAA).
  • There is a planned reduction in the MPAA from £10,000 to £4,000 per annum with effect from April 2017. This will initially be via a consultation, details of which can be found here.
  • Once a person has accessed pension savings flexibly, if they wish to make any further contributions to a Defined Contribution (DC) pension, tax-relieved contributions are restricted to the MPAA.

This is largely an Anti-Avoidance measure that limits the extent to which pension savings can be recycled to take advantage of tax relief.

Whilst currently in a consultation phase, it’s difficult to see that this measure will not be introduced.

 

  1. Foreign Pension income received by UK Residents.
  • The Government intends to review the tax treatment of foreign pensions with the intention of better aligning them with the UK’s tax regime.
  • Section 575 ITEPA 2003 provides that only 90% of income received from a Foreign Pension Scheme is classed as taxable income, unless charged otherwise. This may no longer be possible, but further details are awaited on this measure.

Whilst this potential measure reduces some LTA planning opportunities, in reality it relates only to Income, and has been seen for some time as an anomaly.

 

  1. QROPS – extension from 5 to 10 years of taxing rights and eligible criteria.
  • This is material, as it appears to extend the scope of Member Payment Charge provisions from 5 years to 10 years non-residency for lump sum payments. If this is the case, this would limit the tax exempt lump sum paid to a Non-UK resident to 25%, for a period of 10 full tax years, after the year of departure from the U.K. to avoid the Member being subject to a Member Payment Charge.
  • In addition, the Government will further update the eligibility criteria for foreign schemes to qualify as Overseas Pension Schemes. Again, details are awaited on this.
  1. Pension Savers

The Government will shortly issue a consultation on options to tackle pension scams, including;

  • Banning cold calling in relation to pensions.
  • Giving firms greater powers to block suspicious transfers.
  • Making it harder for scammers to abuse Small Self-Administered Schemes.

All of these planned changes are welcomed, and in fact may lead to smoother Pension transfers.

 

Summary

Whilst not dominating the speech, the changes do impact the International Pensions Market, making it all the more important to seek quality advice, and having the option to switch between jurisdictions, depending on the circumstances of the Member.

The Draft Finance Bill will be issued on the 5th December, which will allow us the opportunity to examine the detail behind these announcements.

 

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