The Chancellor delivered his Autumn Statement on 5 December 2012. The Statement and supplementary documents contained several pensions announcements.
Pensions tax relief
As had widely been rumoured, further changes are being made to the pensions tax regime. From the 2014/15 tax year both the lifetime allowance (the maximum pension saving a person may have over their lifetime) and the annual allowance (the maximum pension saving per year which can receive tax relief) are being reduced. The lifetime allowance will be reduced from £1.5m to £1.25m. The annual allowance will be reduced from £50,000 to £40,000. Further fixed protection (to be consulted on) will be available to protect affected individuals from the reduction to the lifetime allowance. There will also be consultation on a “personalised protection regime” for individuals.
Increase to basic state pension
Other pensions announcements in the Statement were that the basic state pension would be increased by 2.5% in line with the triple lock (the higher of wages, CPI and prices capped at 2.5%) and that the capped drawdown limit for members in defined contribution schemes will be increased from 100% to 120% of the value of the equivalent annuity.
Pensions infrastructure platform
The Chancellor anticipates that the pensions infrastructure platform which includes some pensions funds as founder investors should be operating from first half of 2013.
New statutory objective for Pensions Regulator
The DWP will consult on providing the Regulator with a new statutory objective to consider the long-term affordability of deficit recovery plans to sponsoring employers of trust based pension schemes. In making this announcement the Government states that it is recognising that volatility in measures of pension scheme deficits can make it hard for companies to manage their investment plans and attract external funding.
In addition, the DWP will also consult on whether to allow schemes undergoing actuarial valuations from 2013 to smooth asset and liability values.
This is the second time that the pensions allowances have been reduced since the current pensions tax regime came into force in April 2006. It is interesting to note that the lifetime allowance in 2014/15 will be lower than when the allowance was first introduced.
The announcement that the DWP will consult on a new objective for the Regulator was less anticipated but it may well prove to be a welcome development.