Allowance anger and drawdown joy: reaction to the Autumn Statement
Pensions annual allowance
For once the rumours were true! The chancellor said he will cut the annual allowance of tax relieved pension contributions from £50,000 to £40,000 and
the lifetime allowance from £1.5 million to £1.25 million.
He already changed them in 2010 reducing the annual allowance from £255,000 and lifetime allowance from £1.8 million.
Otto Thoresen, director general of the Association of British Insurers, said: ‘Changing pensions tax allowances for the second time in three years is frustrating although we understand the economic pressures facing the government. It is now vital that ministers commit to these thresholds and avoid further tinkering if long-term savers are to be encouraged to put aside income for their retirement.’
Joanne Segars, NAPF chief executive, said: ‘The government will take twice as much from this tax hit on pensions as it will from the increase in the bank levy. That cannot be fair, and will only undermine confidence in pension saving.
‘The chancellor is wrong to say that the changes will only affect those at the top of the wage tree. Osborne claims he is taking a carrot away from the rich, but he is also beating many middle class savers with a stick. Middle managers in the public and private sectors will get caught in the net.’
The chancellor used his autumn statement to make a political point by saying there were absolutely no plans to move forward with a property-based tax, the Liberal Democrat policy known as the
David Howell, chief executive, Guardian Wealth Management, said: ‘We were delighted to see the chancellor rule out the notion of a mansion tax and echo his comments that it would be both expensive and intrusive.
‘Placing a levy on all homes worth over £2 million, as previously speculated , would have been a further attack on those families who have worked hard and would do little to stimulate the UK housing market.’
High earners will not have been expecting much seasonal joy from the chancellor, but the upshot has been slightly less bleak than feared.
David Kilshaw, partner at KPMG, said the chancellor had been less ‘scrooge-like’ than expected.
‘The reduction in pension pot tax relief was less severe than it could have been, and does not take effect straightaway. There has also been an unexpected rise in the inheritance tax threshold, albeit only 1% and not until 2015 - 16. With the threshold having been frozen for several years, this will be warmly greeted by many.’
Osborne has raised the ISA limit to £11,520 and announced the government would consult on
allowing stocks and shares in AIM-listed companies to be held directly in ISAs.
Danny Cox, head of advice at Hargreaves Lansdown said: ‘Allowing investors access to 1,100 AIM stocks in ISA provides welcome additional choice and opportunity to invest tax efficiently in smaller companies. It is important to note these tend to be a higher risk than blue chip stocks so won’t suit everybody.’
Among the most popular pensions policy announcements of recent Budgets, and Autumn Statements, came today as the chancellor revealed the income limit on capped drawdown arrangements will be increased from 100% to 120%, restoring the 20% uplift.
Andrew Roberts, chairman of the Sipp and SSAS trade body the Association of Member-directed Pension Schemes (Amps), welcomed the restoration of the 20% uplift to the GAD rate. However he said Amps will push for early implementation and back dating of the measure, otherwise pensioners will have to wait until legislation is passed in July 2013.
‘I still need to contact our members to see how quickly they can implement this but it should not be a problem as it is so similar to the existing rules. But we are not sure whether this is a permanent change or a stop gap before a wide review or until GAD rates improve.’
Steve Gay, director of life, protection and savings at the Association of British Insurers said: ‘Drawdown customers will welcome the boost to the income they can take from their pensions. The ABI will work closely with its members and government to ensure this is implemented as efficiently as possible and we look forward to seeing further details’.
The government announced it is increasing HM Revenue & Customs’ resources to tackle offshore evasion and avoidance of inheritance tax using offshore trusts, bank accounts and other entities.
Richard Mannion, national tax director at Smith & Williamson, said: ‘While this is welcome, many of HMRC’s more experienced staff have taken early retirement or redundancy in recent years. Had HMRC been a little more forward thinking and not reduced staffing levels a short while ago, they would almost certainly be in a better position than they are now.’
Michael Wistow, Head of Tax city law firm Berwin Leighton Paisner said: ‘Paradoxically the loopholes that so infuriate the chancellor have been created by excessive tinkering and changes to the tax regime by successive governments. Some of these so-called loopholes were called incentives when they were introduced. Clearer, simpler tax legislation, not political posturing, is the best way to create a favourable climate for UK businesses.’
The Pensions Regulator
The Department for Work and Pensions is to consult on handing The Pensions Regulator (TPR) a statutory objective to consider the effect of recovery plans on sponsoring employers.
Darren Philp, NAPF director of policy, said: ‘A new statutory objective for the TPR could ultimately deliver a more proportionate regulatory regime that recognises wider economic factors. We have long held concerns that the Regulator is more focused on keeping funds out of the Pension Protection Fund, without due regard to the pressures on companies and the impact on workplace pensions.’