The Chancellor’s Autumn Statement today contained some changes which will affect pension schemes.
The biggest changes are to the lifetime allowance which will fall in 2014-15 from £1.5 million to £1.25 million and the annual allowance which will also fall in 2014-15 from £50,000 to £40,000. As with previous reductions to the lifetime allowance, there will a protection regime available to individuals with benefits in excess of the reduced limit, although some of the details have yet to be determined.
The Government wants to ensure that the regulation of occupational pension schemes should not slow down investment and growth. On that basis, a consultation is expected in the New Year which will look at providing the Pensions Regulator with a new statutory objective to consider the long-term affordability of deficit recovery plans for employers and whether to allow companies undergoing valuation in 2013 or later to smooth asset and liability values. This could enable employers to pay lower contribution rates in the short to medium term, although for the moment the Regulator has emphasised that it is “business as usual”. We will have further details once the consultation paper has been published.
Finally, the Government has announced that it will increase the capped drawdown limit for pensioners of all ages from 100% to 120% of the value of an equivalent annuity.
The Chancellor’s statement together with supporting documentation can be found here.