Hundreds of thousands of savers have cashed in £9.2 billion from their pension pots since pension freedoms were introduced in April 2015.
In April 2015, the government introduced significant pension reforms giving people the ability to access their pensions savings how and when they want. Over 1.5 million payments have been made using pension freedoms, with 162,000 people accessing £1.56 billion flexibly from their pension pots over the last three months, according to HMRC figures.
The Economic Secretary to the Treasury, Simon Kirby, said:
‘Giving people freedom over what they do with their hard-earned savings, whether it’s buying an annuity or taking a cash lump sum, is the right thing to do. These figures show that people continue to take advantage of the choices on offer: choices only made available since the government’s landmark pension freedoms were introduced in April 2015.
We are working with our partners, including Pension Wise, the regulators and pension firms, so that savers have the support they need to understand the options available to them.
The statistics show that in the first year of these new rules being available, more than 232,000 people have accessed £4.3 billion flexibly from their pension pots.’
Internet links: GOV.UK news Statistics
With the end of the tax year looming there is still time to save tax for 2016/17. We have set out some points you may want to consider.
- Make full use of your ISA allowance – ISAs can offer a useful tax free way to save, whether this is for your children’s future, a first home or another purpose. Individuals may invest up to a limit of £15,240 for the 2016/17 tax year. A saver may only pay into a maximum of one Cash ISA, one Stocks and Shares ISA and one Innovative Finance ISA per year. Savers have until 5 April 2017 to make their 2016/17 ISA investment.
- Take advantage of capital allowances – By making the most of capital allowances, businesses may be able to write off the costs of capital assets against taxable profits. The Annual Investment Allowance allows businesses to claim a deduction of up to £200,000 of the year’s investment in plant and machinery (excluding cars). Businesses of any size and most business structures can make use of the AIA. However, there are provisions to prevent multiple claims.
- Build a tax efficient retirement plan – Pension contributions must be paid on or before 5 April 2017 for them to be relieved against 2016/17 income. Annual contributions are limited to the greater of £3,600 (gross) or the amount of your UK relevant earnings may be eligible for tax relief. However, these will be subject to the annual allowance, which is generally £40,000. This is further reduced for those with net income over £110,000 and adjusted annual income (their income, plus both their own and their employer’s pension contributions) over £150,000. For every £2 of adjusted income over this figure, a person’s annual allowance is reduced by £1 (down to a minimum of £10,000).
This is only a selection of options that you may wish to consider as part of your tax planning strategy. For more information, and for advice on how we can help you to minimise your tax bill, please contact us.
Please contact us to discuss your personal situation.
The Department for Work and Pensions has confirmed the thresholds for pensions automatic enrolment for 2017/18.
The main qualifying threshold or ‘trigger’ for employees to be automatically enrolled will be maintained at £10,000 per annum. The lower limit of the qualifying earning band and will be £5,876 and the upper limit £45,000.
The written statement also includes:
‘Automatic enrolment has been a great success to date with almost 7 million people enrolled by more than 293,000 employers. It will give around 11 million people the opportunity to save into a workplace pension and we expect this to lead to around 10 million people newly saving or saving more by 2018, generating around £17 billion a year more in workplace pension saving by 2019/20.’
With over a million micro (1 – 4 employees) and small (5 – 49 employees) employers reaching their staging date for auto enrolment in the last quarter of 2016/17 and throughout 2017/18 it is important to ensure employers comply with their obligations. The Pensions Regulator has confirmed the exceptions which apply to employers which can be found at on their website (see the TPR link below).
Please contact us if you would like help with auto enrolment compliance or to determine whether or not your business is exempt from auto enrolment.
Internet links: Parliament written statement TPR exemptions
The Pensions Regulator (TPR) has launched a new step-by-step guide to help small businesses get ready for their automatic enrolment duties.
According to TPR the online guide has been written specifically for employers with between one and 50 staff.
The guide which is broken down into 11 steps, considers the legal requirements and what employers need to do to comply with their obligations.
Executive director for automatic enrolment Charles Counsell said:
‘We are determined to do all we can to reach out to all small and micro businesses preparing for their automatic enrolment duties. We want to make the process as simple as possible so that employers can avoid the risk of non compliance.’
‘Our new online 11-step guide is a key part of a wide package of measures we are rolling out to give more than a million employers all the information they need, written and produced in a way they makes sense to them.’
‘Our message to employers is ensure you know when your automatic enrolment duties begin and start planning in good time. The regulator’s website should be the first port of call for all employers and their advisers as it offers essential information about each task an employer will need to accomplish in order to comply and avoid penalties.’
If you would like help with Auto Enrolment please do get in touch.
Internet links: step-by-step guide Press release
The National Savings & Investments website and helpline are experiencing a high volume of enquiries following the launch of their 65+ Guaranteed Growth Bonds which are being referred to as ‘pensioner bonds’.
The bonds are available for a period of one or three years. The taxable bonds offer savers interest of 2.8% over one year and a fixed annual interest rate of 4% over three years with a minimum investment of £500. Investors are restricted to a maximum investment of £10,000 in each of the two products offered.
The new bonds cannot be held within a New Individual Savings Account (NISA) and only pay interest at the end of the savings term. Where investors cash in their investment early, a penalty equivalent to 90 days’ interest will be applied.
Internet link: NS&I bonds
The government has announced the launch of ‘Pension wise’ which will offer free and impartial guidance to people on the new pension freedoms which comes into effect in April.
Economic Secretary to the Treasury Andrea Leadsom has unveiled the name and logo of the new pensions guidance service.
Pension wise will offer free and impartial information and guidance to people with a defined contribution pension approaching retirement and will be available from April 2015 for individuals approaching retirement.
Economic Secretary to the Treasury Andrea Leadsom said:
‘People who have worked hard and saved all their lives will be free to choose what they do with their money from next April.
We want people to be empowered to make informed and confident choices and I’m delighted to announce Pension wise: Your money. Your choice as the brand name for the impartial guidance service we are building.
Pension wise will be a first port of call for people with a defined contribution pension who are approaching retirement. It is a distinctive brand, making it easy for consumers to know where to go for help and guidance.’
Internet link: News
The Pensions Regulator (TPR) has opened consultation on a proposal to publish a list of pension schemes that are available to any employer, regardless of the number or workers the employer has or their levels of pay.
According to research carried out by the Department for Work and Pensions 48% of small and 79% of micro employers currently have no pension scheme and will have to choose a new one as they prepare for automatic enrolment.
TPR state they are ‘aware of 30-40 providers who offer a scheme for automatic enrolment. Of these, a much smaller number of schemes have indicated they will not reject employers on the basis of size or low value. Even fewer schemes have indicated they will accept all employers who approach them.’
To read more about this issue and the consultation visit the link below.
Internet link: thepensionsregulator.gov.uk