“This government believes in the principles of freedom, Individuals who have worked hard and saved responsibly throughout their adult life should be trusted to make their own decisions with their pension savings” – George Osborne

Is this the final curtain for Lifetime Annuities?

As of April 2015, there will be no restrictions on the amount of income to be taken from a pension. George Osborne is clearly giving people more freedom in terms of how they receive their pension and by doing so some would argue he has he destroyed the annuity market. Barclays predict that the annuity market could shrink by two thirds in the next 18 months.

Flexible Access to Pensions

From April 2015 the majority of savers with pensions who are aged at least 55 will have total freedom as to how they take their pensions:

• Take their whole fund in one go with 25% tax free and the balance taxed as income
• Take adhoc amounts whenever they want subject to 25% of fund value tax free and the balance taxed as income
• Take 25% of fund tax free now and the balance remains invested providing income through income draw down from their pension fund at intervals suited to their needs

New Restrictions

Now for the bad news!

• From 2015 the maximum that can be invested in a pension is subject to an annual allowance which from April 2015 has been reduced to £40,000.
• The lifetime allowance for pension contributions has also been reduced from £1.25 to £1 million for 2016/17 and the allowance will be indexed by CPI from 2018/19

PensionWise

PensionWise is a new government initiative which has useful links for pension savers. Please click the link to find out more about what you can do with your pension pot:
www.pensionwise.gov.uk/pension-pot-options

PensionWise cannot give advice but can give options. It is certainly very helpful in making sure everyone has a better understanding of what Pension Freedom actually means!

Advice

At the end of the day the need for advice has never been greater. Our experienced advisers are here to help if you have existing pension schemes from previous employment and have questions about your options. In addition, we are happy to help you understand exactly which of the new freedoms is most appropriate for you and how do you take advantage of these new rules; we are here to help.

To learn more, please call your WMG adviser or if you are new to WMG, please email us on info@146.66.104.129 or call Hilary on her direct line 01274 957717

Automatic Enrolment

Sweeping new rules on maximum charges that can be applied to Qualifying Funds within a Work Place Pension that qualifies for Automatic Enrolment have been introduced from April 2015.

Changes to Charges

The Pension Minister Steve Webb has confirmed the charging cap on auto-enrolment default funds to be 0.75 per cent from April 2015. This will be subject for review in 2017. The government will then consider lowering it and including transaction costs.

Steve Webb has stated that, “as well as meeting the 0.75 per cent cap, from April 2016 schemes will be prohibited from taking money from people’s pension schemes to pay for sales commission.” In addition, “over the next 10 years the new charge cap will transfer around £200m from the profits of the pensions industry to the pockets of savers.”

Experts say the commission ban, could cost advisers £150m and 1,000 jobs.

New Exceptions for Workers

The new regulations introduce new exceptions for workers:

•  Who are in a notice period
•  Who have ceased active membership of a qualifying pension scheme
•  Who have HMRC tax protected status for their pension savings

For workers who have been given or have themselves given notice to leave employment before or up to 6 weeks after, the automatic enrolment (AE) date or the automatic re-enrolment (Re-AE) date the employer may choose whether to enrol them into a qualifying pension scheme. If the employer chooses not to automatically enrol/re-enrol the employer will have no further duty until the next cyclical re-enrolment date.

New Exceptions for Workers

The number of letters required has also been reduced and the information they contain simplified. From 1 April 2015, there are only four occasions when communications are needed:

•  Enrolling workers
•  Using postponement (one letter)
•  Workers have a right to opt in/join a scheme
•  When applying the transitional period.

The requirement to give separate opt in and joining information when the worker changes category is removed, so the employer may now combine this information. The practical effect of this, is that the employer no longer needs to monitor workers to identify when they change category from entitled worker to jobholder (or vice versa), as the relevant information on both opt in and joining is given up front. This simplifies the assessment process, so the employer only needs to identify two subsets of their workforce; those who must be automatically enrolled and those who do not.

The entitled worker and non-eligible jobholder tailored letters are no longer required. If a worker is already a member of a qualifying scheme at staging, there is no longer a requirement to inform them

Changes to Qualifying Earnings

Every year, the Department for Work and Pensions (DWP) reviews the earnings thresholds for automatic enrolment. Where there’s a change, these are published on The Pensions Regulator website to take effect from the start of the next tax year. The Expected annual earnings thresholds for 2015 – 2016 tax year are as follows:

•  Lower level of qualifying earnings £5,824
• Upper level of qualifying earnings £42,385
• Earnings trigger for automatic enrolment no change at £10,000

For more information, contact us

Click here to read some great advice for organisations preparing for auto enrolment.

Click here to read about the importance of preparing your data for export and how to get it right first time.