Here is a short and sweet summary of the key points from the Autumn Statement from a financial planning perspective.
Money purchase annual allowance reduction
The government has announced it intends to reduce the money purchase annual allowance to £4,000.
The MPAA was reduced to £10,000 in April 2015 and in his first Autumn Statement, chancellor Philip Hammond said the government would launch a consultation on bringing it down even further.
The government said an allowance of £4,000 is ‘fair and reasonable’ and should allow people who need to access their pension savings to rebuild them if they subsequently have the opportunity to do so.
It also said the allowance would limit the extent to which pension savings could be recycled to take advantage of tax relief which is not within the spirit of the pension tax system: ‘The government does not consider that earners aged 55+ should be able to enjoy double pension tax relief i.e relief on recycled pension savings.’
Pension cold calling consultation
Another interesting consultation Hammond announced was into how it could tackle pension scams, including a ban on pension cold calling, giving firms greater powers to block suspicious transfers and making it harder for scammers to abuse small self-administered schemes.
The announcement followed a petition started by financial adviser Darren Cooke, director at Red Circle Financial Planning, which received over 7,000 signatures.
Salary sacrifice restrictions
The tax and employer National Insurance advantages of salary sacrifice schemes will be removed from April 2017 on arrangements excluding pension savings, pension advice, childcare, Cycle to Work and ultra-low emission cars.
The government said this change means employees swapping salary for benefits will pay the same tax as the vast majority of individuals who buy them out of their post-tax income.
Any arrangements that have been put 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.
Pension triple lock saved… for now
Hammond announced the government would keep its pledge to the state pension triple lock.
The government had committed to keep the measure in place until at least 2020.
However Hammond also made comments about rising longevity rates which many have taken to be a hint that it may be cut in the future.
Foreign pensions overhaul
The government has decided to ensure the tax treatment of foreign pensions will be more closely aligned with the UK domestic pension tax regime by bringing foreign and lump sums fully into tax for UK residents to the same extent as domestic ones.
It also announced it would close specialist pension schemes for those employed abroad (known as section 615 schemes).
Tax avoidance crackdown
The government announced it would strengthen its tax avoidance measures, including introducing a new penalty for any person who enabled another person or business to use a tax avoidance arrangement if it is later defeated by HMRC. In the government’s definition, a tax avoidance enabler could be a financial adviser.
The government also announced it would remove the defence of having relied on non-independent advice as taking ‘reasonable care’ when considering penalties for any person or business that uses such arrangements.
Tackling tax charges on onshore and offshore bond withdrawals
Following a consultation, the government has decided to tackle the disproportionate tax charges that occur in some circumstances from life insurance policy part-surrenders and part-assignments.
The government said the changes would allow applications to be made to HMRC to have the charge recalculated on a just and reasonable basis which will lead to fairer outcomes for policyholders from April 2017.
Corporation tax cut
The government has committed to cutting the rate of corporation tax to 17% by 2020.
Personal allowance and higher rate tax threshold confirmation
The government confirmed the tax-free personal allowance would increase to £12,500 and the higher rate of income tax threshold would move to £50,000 by the end of the current parliament.