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

BUDGET 2017 – IMPACT ON INDIVIDUALS March 2017

AGENDA • Overview • AA and LTA reminder • Flexible workplace savings • Other changes • Actions • Autumn Statement 2017 • Questions 2

OVERVIEW Money Purchase Allowance 10k 4k Other pension allowances unchanged LISA – going ahead Personal Tax Allowance £11,500 NI and other changes 3

PENSION ALLOWANCES Annual Allowance (AA) £300,000 • Annual limit on tax privileged pension contributions £250,000 - Introduced in 2006 £200,000 - Full marginal tax relief on employer and employee £150,000 contributions up to AA £100,000 - Tax charge on contributions which exceed the AA £50,000 - Carry forward of previous unused relief available for catch-up funding £0 ‘Scheme Pays’ option for if AA tax charge arises - Measuring pension contributions against the AA Annual Allowance • Defined Contribution Schemes £45,000 - Gross value of all contributions in Pension Input Period £40,000 • Defined Benefit Schemes £35,000 16 x increase in ‘accrued pension’ ( adj. for CPI) £30,000 - £25,000 Tapered Annual Allowance (TAA) £20,000 £15,000 • Tapered reduction in AA for individuals earning over £10,000 £150,000, from April 2016 £5,000 - Including value of employer contributions £0 - More employees unable to take full advantage of company pension contributions Annual Earnings Annual Allowance 4

MONEY PURCHASE ANNUAL ALLOWANCE (“MPAA”) • Applies if benefits have been flexibly accessed • Currently £10,000 • Complex rules; tax on excess money purchase savings over £10k and annual allowance on defined benefit savings reduced to £30k • No carry forward from previous years • MPAA reduces to £4,000 from 2017/18 Presentation Title 5

LIFETIME ALLOWANCE Lifetime Allowance (LTA) on pensions ‘output’ £2,000,000 • Limit on accumulated tax privileged pension saving £1,800,000 - Reduced to £1m in April 2016 (for members that do not already £1,600,000 have ‘protection’) £1,400,000 - Tax charge of 55% on benefits over the LTA £1,200,000 £1,000,000 Issues: £800,000 • More employees will be impacted by the Lifetime Allowance £600,000 £400,000 • And not just those currently saving into a pension £200,000 - Pot of circa £750k will exceed LTA in 10 years without any further £0 contributions • 55% potential tax charge on employee and employer contributions means that employees can ‘lose out’ if they pay into the pension Lifetime Allowance • New protections introduced – FP 2016 and IP 2016 • IP 2014 still available 6

FLEXIBLE WORKPLACE SAVINGS Option Annual Tax treatment Employer NI contribution Access Usage E xempt or T axed on liability? limit contribution, growth, access EET Tax relief on up to £40,000 pa Tax relief on contributions, Pension Tapered reduction to tax privileged growth, 25% of From Age 55 No restriction No £10,000 if earning fund tax free on withdrawal, >£150,000 pa remainder subject to income tax TEE £20,000 (2017/18) Workplace (LISA contributions Contributions from after tax Anytime No restriction Yes ISA will count towards pay. Tax privileged growth, ISA allowance) tax free withdrawals TEE + Bonus From Age 60 or to Before Age 60 £4,000 pa purchase first – property Must be under age 40 Contributions from after tax property. purchase LISA to open LISA, pay, receive 25% Other withdrawals Yes contributions must Government bonus. Tax subject to 25% After Age 60 – cease after age 50 privileged growth, tax free charge from no restriction withdrawals 6/4/2018 TTT Contributions from after tax Unlimited Workplace pay. Growth subject to CGT (Relevant if other General (£11,300 (2017/18) CGT limits exceeded or Anytime No restriction Yes Investment allowance pa, distributions employee wants to taxable except within Account fund their own ISA) Dividend and Savings allowances) 7

OTHER CHANGES Overseas Termination Investment pension payments Bond transfers Self employed NI General ISA Junior ISA Tax free childcare Salary Tax and NI Sacrifice rates changes 8

OTHER CHANGES Tax and NI Rates and Allowances for 2017/18 • https://www.gov.uk/government/publications/spring-budget-2017- overview-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 9

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 10

AUTUMN STATEMENT 2017 • 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 11

THANK YOU FOR LISTENING ANY QUESTIONS?

CONTACT Raymonde Nathan Email: Raymonde_Nathan@JLTGroup.com 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. 13