Week ending Mar 20: Budget 2016 | HMT/FCA FAMR update | TPR: Scheme Returns and more
- George Osborne delivered his eighth Budget on 16 March.
- Strictly speaking, pensions tax relief is unchanged but the Chancellor announced the introduction of a new Lifetime ISA for the under 40s which some individuals may choose instead of pension savings.
- Minor changes are being made to pension tax rules to ensure they operate as intended following the introduction of flexibility in April 2015.
- The Money Advice Service is to close, while Pension Wise and TPAS are set to merge.
- The government is considering limiting the range of benefits that attract income tax and NICs advantages when they are provided as part of salary sacrifice schemes. However, pension salary sacrifice won’t be affected.
- The recommendations of the Financial Advice Market Review are accepted and will be implemented.
- Termination payments over £30,000 will be subject to employer National Insurance contributions from 2018.
- Class 2 National Insurance contributions, payable by the self employed, are abolished from April 2018.
- Corporation tax will reduce to 17 % in 2020.
- The Personal Tax Free Allowance will increase to £11,500 from April 2017. The higher rate allowance increases to £45,000 at the same time.
- The threshold for business rate relief is increased from £6,000 to £12,000 for small businesses.
- Capital Gains Tax Rates reduce from 28% to 20% (higher rate) and 18% to 10% (basic rate tax payers).
- Insurance Premium Tax is being increased by 0.5%.
- There will be a new Help to Save scheme for those in receipt of in-work benefits.
A JLT Client Alert is available.
HMT/FCA FAMR update
The final FAMR report has been published, which recommends measures aimed at stimulating the development of a market that provides affordable and accessible financial advice and guidance for all and proposals designed to increase consumer engagement with financial advice. These fall into three broad categories:
- accessibility, and
- liabilities/consumer redress.
Recommendations include a proposal that FCA should set up a dedicated team to assist firms that are seeking to develop large scale automated advice models. Also, a review into the Financial Services Compensation Scheme will commence next month.
A House of Commons library briefing paper sets out FAMR’s recommendations and includes the first independent review of the Retail Distribution Review.
TPR: Scheme Returns
The Pensions Regulator has highlighted the fact that it has warned a number of trustees they could face being fined for failing to complete their scheme return.
Figures show that DC scheme return completion rates have fallen for the second year running. Consequently, the Pensions Regulator is sending letters to a group of trustees who are in breach of the law to warn them to complete their 2015 scheme return or risk facing a fine.
TPR adds that it will consider publishing details of trustees who have failed to complete their scheme return.
WPSC reports on State Pension Ages
The House of Commons Work and Pensions Committee has published an interim report on the introduction of a higher state pension age as part of its inquiry into state pension reform. The report invites the government to consider offering women who were given short notice of the increase in the state pension age the option to retire earlier, with a slightly reduced pension.
The report considers alleged failures and shortcomings in the communication of changes to the SPA, and the impact both of this and of later access to pensions, especially on women born in the 1950s.
The Committee’s primary recommendation is about communication. It says that whilst there may always be communication issues between government and citizens when laws change, more could and should have been done, especially between 1995 and 2009.
It notes that the government has launched a new independent review to consider in 2017 the SPA beyond 2028, and it highlights suggestions on what should be done in the future. It says it is critical that people affected by any future changes in the SPA are fully and properly informed.
The Committee has invited the government to consider offering women who were given short notice of the increase in the SPA the option to retire earlier, with a slightly reduced state pension. It says it will be taking further evidence on this idea, including taking a submission from the Government Actuary, and is seeking a debate to explore the options further.
Final regulations for PAYE reporting on pension flexibility payments
Final amending regulations have been issued for real-time information (RTI) reporting requirements on pension providers in respect of certain lump sum payments.
Pension providers will have to report the following payments to HMRC: a flexible access payment made under a DC arrangement as a consequence of the Taxation of Pensions Act 2014 and payment of any authorised lump-sum death benefits that are taxed as income with effect from 6 April 2016 in accordance with the Finance (No. 2) Act 2015.
Minor amendments are also made in relation to documents to be submitted to HMRC and the use of electronic communications.
John W. Wilson LLB(Hons) FPMI ACII, Head of Research| Email: firstname.lastname@example.org
Julian Rowe, Head of Technical | Email: email@example.com