2011 pensions tax regime: what the consultation paper reveals

The consultation paper on the 2011 tax regime for pensions has been published. The consultation includes much of what was expected, together with a change that will broaden significantly the impact of the measures. Whether a person is caught by the new rules depends on their income level and the Government has decided that the definition of income, for this purpose, is to include the value of employer pension contributions. The Government now expects the measures to affect about 300,000 people, an increase of 30% on its original estimate of 230,000.

Regulator softens stance on longer recovery plans

The Pensions Regulator is taking a softer line on recovery plans that exceed its ten-year trigger. The Regulator’s latest analysis of recovery plans finds weighted average recovery plan length has grown to 8.2 years for the most recent group of schemes issuing their first recovery plans following a scheme-specific valuation. This is an increase from 6.2 years for those schemes at a similar stage a year ago.

Retirement age back in the spotlight as Tories pledge to bring forward increases

The State pension age (SPA) is back under the spotlight following the Conservatives’ pledge to increase it in 2016 – ten years ahead of the schedule laid out in the Pensions Act 2007 – and amid calls from think tanks to increase it to 70. The Shadow Chancellor, George Osborne, also pledged to reverse the effects of Gordon Brown’s pensions tax raid – the infamous 1997 abolition of the advance corporation tax credit – although this may be difficult to achieve, given that the ACT change was abolished as part of larger tax measures.

DWP proposes lengthy introduction for auto-enrolment

The DWP’s proposal of a three-year period for the first phase of auto- enrolment has attracted much criticism because it will fail to cover all employees until October 2015. The Conservative’s pensions spokesman, Nigel Waterson has promised a ‘fast and dirty’ review of the entire personal accounts project if the Tories are elected at the next general election and revealed that they are working on a plan B that could deliver the objective in a more reasonable timescale.

DC market comes of age

Most informed expect that future UK pension provision will be on a DC basis. With the accelerating closure of traditional final salary pension arrangements to existing employees and more employers offering DC arrangements to their employees, we outline below three ‘hot topics’ in the current DC market.

RSA continues path of de-risking by completing synthetic 'buy-in'

RSA Insurance Group plc (RSA) and its UK pension schemes took significant action in July to reduce the schemes’ exposure to longevity, inflation and interest rate risk by securing £1.9bn of liabilities with Goldman Sachs and Rothesay Life (a life insurance company wholly owned by Goldman Sachs).

BP and Barclays make scheme changes

June saw further evidence of significant changes being made to major employers’ pension schemes. The inexorable shift away from final salary schemes gained momentum with Barclays closing its scheme to existing members for future accrual, while BP closed its currently well-funded scheme to new employees. Both firms cited longevity risk as a key influence on their decisions, but economic and political uncertainty – including the 15th set of ministerial changes at the DWP in the last 12 years – must also have played their part.

Budget discontent rumbles on

The dust is still settling following the Budget saying "I will restrict pension tax relief for those with incomes over £150,000 so it is gradually tapered to the same 20 per cent rate the majority of people receive." Given that he uttered this comment while driving a coach and horses through the long-standing principle of tax-exempt contributions underpinning the UK’s pension system, there have been surprisingly few howls of pain.

Pension saving hit as Darling targets high earners

Alistair Darling’s 2009 Budget attacks tax relief on higher earners’ pension contributions as he seeks both to plug the hole in the nation’s finances and garner public support with an election on the horizon. Our Monitor – Budget Special summarised how this measure will be introduced, what it will do in practice and how employers need to respond. Below we recap on the significance of this specific measure and set it in the context of the other Budget changes.

UK Budget: The beginning of the end for higher-rate tax relief on pensions contributions?

In his 2009 Budget the Chancellor made a small scale raid on pension plans in his attempt to fill the UK’s public finance black hole. From April 2011, individuals with annual income over £150,000 will no longer receive marginal rate tax relief on pension contributions. Instead, relief will be restricted, tapering to 20% for those earning £180,000.

Auto-enrolment sets tight deadlines

The Department for Work and Pensions (DWP) has issued a consultation paper and draft regulations on the automatic enrolment process into a qualifying workplace pension scheme, which can include Personal Accounts. The regulations set out the arrangements, including the flow of information from employers to their employees, deduction of contributions, arrangements for individuals to opt-out of workplace pension saving and to receive refunds of any contributions that might already have been taken, and finally the arrangements by which some employers can postpone automatic enrolment provided that they offer sufficiently generous pension provision to their workers.