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For the first time in years, the UK had two Budget announcements this year and the latest Summer Budget, the first by a Tory Government in almost 20 years, lasted a record 65 minutes.
The previous coalition government announced in 2014 that people will be given greater control over how they access their pension savings. Since these reforms were introduced in April this year, around 85,000 people have accessed their pension savings. Click here to download your free essential guide to the new pension freedoms.
The summer budget saw some further tinkering with the pension landscape though, and it was announced on 8 July that those individuals with adjusted annual income in excess of £150,000 will see the introduction of a new taper to their Annual Allowance, resulting in a reduction in the tax relief on their pension contributions. For every £2 earned above this level the Annual Allowance will reduce by £1, until it reaches a minimum level of just £10,000.
Those who have net income of no more than £110,000 will not be subject to this new tapered Annual Allowance however, so it is important that you seek advice if you are in any doubt over whether these new rules apply to you.
Whilst these new measures are expected to only affect a small minority of savers, the tax relief savings that the government will make is intended to fund the introduction of a new Inheritance Tax property band. The Main Residence Nil Rate Band (MRNRB) of £175,000 is being introduced from April 2017 and will be covered in a further article to be published shortly.
As if these new restrictions on tax relief weren’t enough, a consultation has also begun to assess if a total reform to pension tax relief should be made. The Government wishes to establish whether reviewing the current tax relief system will incentivise people to save more and create a simpler and transparent system compared to the current framework, which has been in existence for several decades. The consultation is open until 30 September 2015, although it is not certain what the outcome will be, or if and when changes will be introduced.
The budget also announced that Pension Wise, the free and impartial guidance service for pension savers, is to be extended to those aged 50 and over (it was previously only available to those aged 55 and above). It is important to be aware that Pension Wise is a guidance only service and will make no product recommendations, so if guidance is not enough, seek professional advice from a regulated financial adviser.
We will have to wait until the Autumn before the plans for the secondary annuity market are made available. The launch was originally planned for April 2016, but this has been delayed until April 2017 to allow for the necessary infrastructure to be developed.
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