Pensions And Savings

Personal savings allowance

From 6 April 2016 an allowance will be introduced to remove tax on up to £1,000 of savings income for basic rate taxpayers and up to £500 for higher rate taxpayers, as announced in the March Budget 2015. Additional rate taxpayers will not receive an allowance. Automatic deduction of 20% income tax by banks and building societies on non-ISA savings will cease from the same date.

Pensions – reduced lifetime allowance

From 6 April 2016 the lifetime allowance for pensions will be reduced from £1.25 million to £1 million, as previously announced. Transitional protection for pension rights that are already over £1 million will be introduced to ensure this change is not retrospective. The lifetime allowance will be indexed annually in line with the consumer prices index (CPI) from 6 April 2018.

Pensions – reduced annual allowance

From April 2016 a tapered reduction in the amount of the annual allowance will be introduced for individuals with income (including the value of any pension contributions) of over £150,000 and who have an income (excluding pension contributions) in excess of £110,000. The rate of reduction in the annual allowance is £1 for every £2 that the individual’s adjusted income exceeds £150,000, up to a maximum reduction of £30,000, creating a minimum allowance of £10,000.

All pension input periods open on 8 July 2015 are closed on that date, with the next pension input period running from 9 July 2015 to 5 April 2016. All subsequent pension input periods will be concurrent with the tax year from 2016/17 onwards.

Pensions tax relief

There will be a consultation on whether and how to undertake a wider reform of pensions tax relief.

Unfunded employer financed retirement benefit schemes (EFRBS)

There will be a consultation on tackling the use of unfunded EFRBS to obtain a tax advantage in relation to remuneration.

Secondary market for pension annuities

Following consultation after the March 2015 Budget, a secondary annuity market will not now open until 2017. Further plans will be published in the autumn.

Venture capital schemes

All investments made by seed enterprise investment schemes (SEISs), enterprise investment schemes (EISs) and venture capital trusts (VCTs) will have to be made with the intention to grow and develop a business. This requirement is subject to state aid approval and will take effect from Royal Assent to the Summer Finance Bill 2015. From the same date:

  • All investors will be required to be ‘independent’ from the company at the time of the first share issue.
  • Relief will be limited to investment in companies within seven years of their first commercial sale and for ‘knowledge intensive’ companies within ten years of their first commercial sale. This will not apply where the investment represents more than 50% of turnover averaged over the preceding five years.
  • There will be a new cap on the total investment a company may raise under VCTs, EISs and other risk finance investments of £20 million for knowledge intensive companies, and £12 million for other companies.
  • A higher 500 employee limit will apply to knowledge intensive companies.
  • Venture capital funds will be prevented from acquiring existing businesses, including extending the prohibition on management buyouts and share acquisitions to VCT nonqualifying holdings and VCT funds raised pre-2012.

SAVER – Consider investing as much as you can in your pension this year – especially if you are approaching the current lifetime allowance.


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