Autumn Statement: pensions - are there any changes?
Greg Moss, Senior Wealth Adviser, comments on Hammond's Autumn Statement in relation to pensions:
"As expected, salary sacrifice arrangements have come under further scrutiny, with tax and National Insurance Contribution advantages on certain types of benefits being neutralised from April 2017. Significantly, however, pension arrangements (including advice on them) are excluded from this change, which is welcome. Given recent increases in rates of tax on dividends, pension contributions by way of salary sacrifice continue to be a very attractive method of profit withdrawal for owner managers of businesses. That said, the direction of travel still appears to be for successive rule changes to make profit extraction less and less flexible for business owners and pension funding more restrictive and/or less tax efficient. So it is probably worth investigating the benefits of locking in the advantages of this kind of arrangement while they last.
"The Money Purchase Annual Allowance (MPAA) is a reduced allowance for pension contributions, which is slapped on individuals who have used the new rules to access any of their pensions flexibly (e.g. by using flexi access drawdown). The Chancellor intends to reduce this from £10,000 a year to £4,000 (the standard annual allowance is £40,000). This highlighted, once again, the importance of weighing any decisions about whether to use the new pension flexibilities very carefully, and of taking good advice. If you make a hasty decision you could find yourself trying to rebuild a pension fund with a very low limit on the amount of help you will get by way of tax relief.
"On this note, the announcement of a consultation on options for tackling pension scams is very welcome. This includes banning cold calling in relation to pensions, giving firms greater powers to block suspicious transfers and making it harder for scammers to abuse ‘small self-administered schemes’. Given the continuing complexity of pension rules, and the life changing consequences of getting decisions wrong, any measures to remove rogue operators from this space are good news. In the meantime, always make sure you are using a reputable and professional adviser before making decisions on pensions, which are often irreversible."