Week ending 13 March 2020
Rishi Sunak’s first Budget contained a key pensions tax announcement. The income limits for the tapered annual allowance are to be increased by £90,000 each for the 2020/21 tax year. This is designed to ease the problem of senior clinicians leaving the NHS due to pension tax charges, but it applies to all high earners.
The first income test (threshold income) will be increased from £110,000 to £200,000 (threshold income includes all taxable income but excludes pension contributions). So, for anyone with income under £200,000, their 2020/21 annual allowance will be the standard £40,000. The second income test (adjusted income) includes pension contributions and is increased from £150,000 to £240,000. This is the point at which tapering of the annual allowance will begin (the standard annual allowance will reduce by £1 for every £2 by which adjusted income exceeds £240,000). The minimum annual allowance is being reduced from £10,000 to £4,000, so the latter will apply to those whose adjusted income is £312,000 or more.
There were also the following expected pension announcements on Budget day:
- the lifetime allowance will rise to £1,073,100 from 6 April 2020
- a call for evidence is due shortly on the issue of anomalous pension tax relief for non-tax payers
- the long-awaited consultation on reform to the RPI methodology has been published and is open until 22 April 2020 (its premise is that RPI will change, the key question being when).
The Pensions Regulator has published a statement setting out the issues which trustees need to consider in response to COVID-19 (coronavirus). Trustees are expected to have monitoring and contingency planning in place to enable them to deal with any problems that arise.
During a turbulent week for investment markets, the Bank of England cut the bank base rate from 0.75% to 0.25% in a move designed to help with the economic impact of the coronavirus outbreak.
The Government has published illustrative regulations setting out the provisions for Collective DC (CDC) schemes. These regulations come under the high-level framework set out in the Pension Schemes Bill (which has now reached the Report stage of its journey through Parliament). These include requirements for applying for authorisation of a CDC scheme, calculating benefits, valuations and events which trigger the involvement of TPR. The regulations are based on those developed for master trusts.
In the news this week, the second Lloyds judgement says that historic transfer payments need to reflect GMP equalisation, the Pension Schemes Bill moves back to the Lords, TPR gets tough on AE compliance, the FCA surveys DB transfer advisers again and another buy-in is completed.
This quarter’s Arena has a summary of our recent Pensions Perspective, “Endgame planning comes of age”, which looked at how long-term funding and investment plans are evolving and why companies are increasingly taking the lead in designing an endgame strategy. It also shows all the usual financial and investment analysis for the quarter ending 30 September 2020.
Journey plans or glide paths may have been around for a long time but they’re at the heart of the Regulator’s proposed new funding code. In this Pensions Perspective, Leonard Bowman looks at how long-term funding and investment plans are evolving and explains why companies are increasingly taking the lead in designing an endgame strategy for their schemes.
This quarter’s Arena has a summary of our recent Pensions Perspective, “Emerging from lockdown”, which looked at how best to tackle the most common pension issues which companies are currently facing. It also shows all the usual financial and investment analysis for the quarter ending 30 June 2020.
As we keep hearing, we are living in unprecedented times. However, as we turn our attention to the future, what does the “new normal” mean for defined benefit pension schemes? In this Pensions Perspective, Leonard Bowman considers the most common pension issues that companies are facing and how best to ensure that the company approaches these on the front foot.
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