IMPACT ON INDIVIDUALS March 2017 AGENDA Overview AA and LTA - - PowerPoint PPT Presentation

BUDGET 2017 – IMPACT ON INDIVIDUALS

March 2017

• Overview
• AA and LTA reminder
• Flexible workplace savings
• Other changes
• Actions
• Autumn Statement 2017
• Questions

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AGENDA

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OVERVIEW

Money Purchase Allowance 10k 4k Other pension allowances unchanged LISA – going ahead Personal Tax Allowance £11,500 NI and other changes

Annual Allowance (AA)

• Annual limit on tax privileged pension contributions
• Introduced in 2006
• Full marginal tax relief on employer and employee

contributions up to AA

• Tax charge on contributions which exceed the AA
• Carry forward of previous unused relief available for

catch-up funding

• ‘Scheme Pays’ option for if AA tax charge arises

Measuring pension contributions against the AA

• Defined Contribution Schemes
• Gross value of all contributions in Pension Input Period
• Defined Benefit Schemes
• 16 x increase in ‘accrued pension’ (adj. for CPI)

Tapered Annual Allowance (TAA)

• Tapered reduction in AA for individuals earning over

£150,000, from April 2016

• Including value of employer contributions
• More employees unable to take full advantage of

company pension contributions

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PENSION ALLOWANCES

£0 £50,000 £100,000 £150,000 £200,000 £250,000 £300,000

Annual Allowance

£0 £5,000 £10,000 £15,000 £20,000 £25,000 £30,000 £35,000 £40,000 £45,000

Annual Earnings

Annual Allowance

Presentation Title 5

• Applies if benefits have been flexibly accessed
• Currently £10,000
• Complex rules; tax on excess money purchase savings over £10k and annual allowance
• n defined benefit savings reduced to £30k
• No carry forward from previous years
• MPAA reduces to £4,000 from 2017/18

MONEY PURCHASE ANNUAL ALLOWANCE (“MPAA”)

Lifetime Allowance (LTA) on pensions ‘output’

• Limit on accumulated tax privileged pension saving
• Reduced to £1m in April 2016 (for members that do not already

have ‘protection’)

• Tax charge of 55% on benefits over the LTA

Issues:

• More employees will be impacted by the Lifetime Allowance
• And not just those currently saving into a pension
• Pot of circa £750k will exceed LTA in 10 years without any further

contributions

• 55% potential tax charge on employee and employer contributions

means that employees can ‘lose out’ if they pay into the pension

• New protections introduced – FP 2016 and IP 2016
• IP 2014 still available

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LIFETIME ALLOWANCE

£0 £200,000 £400,000 £600,000 £800,000 £1,000,000 £1,200,000 £1,400,000 £1,600,000 £1,800,000 £2,000,000

Lifetime Allowance

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FLEXIBLE WORKPLACE SAVINGS

Option Annual contribution limit Tax treatment

Exempt or Taxed on contribution, growth, access

Access Usage Employer NI liability?

Pension

Tax relief on up to £40,000 pa Tapered reduction to £10,000 if earning >£150,000 pa EET Tax relief on contributions, tax privileged growth, 25% of fund tax free on withdrawal, remainder subject to income tax From Age 55 No restriction No

Workplace ISA

£20,000 (2017/18) (LISA contributions will count towards ISA allowance) TEE Contributions from after tax

• pay. Tax privileged growth,

tax free withdrawals Anytime No restriction Yes

LISA

£4,000 pa Must be under age 40 to open LISA, contributions must cease after age 50 TEE + Bonus Contributions from after tax pay, receive 25% Government bonus. Tax privileged growth, tax free withdrawals From Age 60 or to purchase first property. Other withdrawals subject to 25% charge from 6/4/2018 Before Age 60 – property purchase After Age 60 – no restriction Yes

Workplace General Investment Account

Unlimited (Relevant if other limits exceeded or employee wants to fund their own ISA) TTT Contributions from after tax

• pay. Growth subject to CGT

(£11,300 (2017/18) CGT allowance pa, distributions taxable except within Dividend and Savings allowances) Anytime No restriction Yes

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OTHER CHANGES

Investment Bond Tax free childcare Junior ISA General ISA Self employed NI Tax and NI rates Overseas pension transfers Salary Sacrifice changes Termination payments

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OTHER CHANGES

Tax and NI Rates and Allowances for 2017/18

• https://www.gov.uk/government/publications/spring-budget-2017-
• verview-of-tax-legislation-and-rates-ootlar/annex-a-rates-and-

allowances

Reform of tax treatment of termination payments. From 6 April 2018:

• Compensation payments on termination of employment will remain

exempt from income tax up to £30,000

• But the position regarding employer NI contributions will be aligned with

income tax, so that only the first £30,000 will be exempt

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WHERE DOES THIS LEAVE INDIVIDUALS?

Consider additional contributions to sweep up unused relief Be aware that taking benefits flexibly will reduce AA for DC contributions from £40,000 to £4,000! Be even more aware of cold callers recommending pension transfers overseas Greater scope for saving for the future Probably in general in a better place but only on the margins

• Chancellor gets ‘second bite’ of cherry later this year
• More fundamental reform of pensions may follow depending on –
• Automatic Enrolment review
• State Pension Age review
• Consultation on DB pension schemes

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AUTUMN STATEMENT 2017

ANY QUESTIONS?

THANK YOU FOR LISTENING

Whilst all reasonable care has been taken in the preparation of this presentation no liability is accepted under any circumstances by Jardine Lloyd Thompson for any loss or damage occurring as a result of reliance on any statement, opinion, or any error or omission contained herein. Any statement or opinion unless otherwise states should not be construed as independent research and reflects our understanding of current or proposed legislation and regulation which may change without notice. The content of this document should not be regarded as specific advice in relation to the matters addressed. JLT Benefit Solutions Limited. Authorised and regulated by the Financial Conduct Authority. A member of the Jardine Lloyd Thompson Group. Registered office: The St Botolph Building, 138 Houndsditch, London EC3A 7AW. Registered in England No. 02240496. VAT No. 244 2321 96.

Raymonde Nathan Email: Raymonde_Nathan@JLTGroup.com

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CONTACT