Draft clauses for inclusion in the Finance Bill 2013 have been published for comment, together with an accompanying overview of the draft legislation. The pensions-related content includes:

  • changes to reduce the lifetime allowance (“LTA”) to £1.25m and to reduce the annual allowance (“AA”) to £40,000 from 6 April 2014;
  • provisions setting out the fixed protection regime which will apply to the 2014 LTA reduction;
  • changes removing certain restrictions in the 2012 fixed protection regime;
  • changes to restrict the terms of the employee’s income tax exemption on employer pension contributions so that it only applies where the contributions are made to the employee’s own pension arrangements;
  • changes to allow bridging pensions to be paid to the later of age 65 and the member’s state pension age; and
  • provisions increasing the capped drawdown limit for all pensioners from 100% of the value of an equivalent annuity to 120% with effect from 26 March 2013.

The draft clauses are open for comment until 6 February 2013.

In addition, in the Autumn Statement (delivered on 5 December 2012), the Chancellor announced that the DWP will consult on:

  • introducing a new statutory objective for the Regulator to consider the long-term affordability of recovery plans for sponsoring employers; and
  • whether to allow smoothing of asset and liability values for valuations from 2013 onwards.

For more information on the Autumn Statement, please see our client alert.

Action

Consider reviewing schemes for particular features which could cause members to breach the reduced AA.

Action

Where arrangements have been made, contractually or by rule amendment, to cap accrual to prevent the AA being exceeded, review the terms of those arrangements.

Action

Consider whether such arrangements should be extended to other members, and what communications should be made about them.