With the Chancellor's speech on Wednesday still ringing in our ears, Philip Richardson provides his analysis on the most important features of the Autumn Statement 2015 for pensions lawyers.
This article was first published on Lexis®PSL Tax on 25 November 2015. Click for a free trial of Lexis®PSL.
What are the headlines for this year's Autumn Statement for pensions lawyers and why?
From April 2016 the basic state pension will again be increased by the 'triple lock', which will be the biggest real terms increase to the state pension for 15 years. There will also be a larger increase to the standard minimum guarantee, so single pensioners with a weekly income of below £155.60 will now be eligible for this top up.
The government has also advised that to simplify the state pension from April 2016 it will be introducing a single tier pension with a starting rate of £155.65. To further incentivise the auto-enrolment scheme, the next two phases of minimum contributions will be postponed and aligned to the tax years. It is anticipated that this should simplify the administration involved in the scheme, especially for smaller businesses. The increase from 2%-5% will now take place in April 2018, and the final increase to 8% will take effect in April 2019.
The existing arrangements for investment by the LGPS have been earmarked for reform for some time, and the government has now issued guidance in relation to its plan to pool the 89 local government pension funds into six British wealth funds. Local authorities are invited to put forward ambitious proposals for pooling to drive down investment costs and achieve the benefits of scale.
Were there any surprises?
Given the success of the auto-enrolment scheme with the number of employees saving for their retirement at its highest level since 1997, it is no surprise that the government is seeking to ease the burden on small employers by postponing the mandatory contributions in its final stages of implementation.
Pension lawyers might however have expected a more substantive indication from the Chancellor in respect of anticipated changes to the pension tax regime following the end of the consultation announced in the last budget--however the indication is that a full response will be provided in the Spring 2016 Budget.
What actions should pensions lawyers be taking as the dust settles?
Ensuring their clients are aware of the delayed increase to the auto enrolment pension contributions will be key for pension lawyers, as will keeping abreast of the outcome of the reform to pensions tax relief.