IMPORTANT CHANGES TO BOTH STATE AND PRIVATE PENSIONS

The coalition government has committed to addressing around 80% of the structural deficit through spending cuts rather than tax increases. However, the recent Comprehensive Spending Review will still have tax planning implications for many company directors and high earners...

The most obvious change is for pensions, with the Government equalising the State Retirement Age for men and women from 2018. It will then rise to 66 by 2020, four years ahead of previous plans. The minimum retirement age for private pensions remains at 55 but any private pension income will have to supplement the State pension for longer.

Chancellor George Osborne confirmed the National Employment Savings Trust (NEST) will proceed so auto-enrolment for workplace pension schemes starts as planned in 2012. This all comes on top of changes to the pension rules announced prior to the spending review, which include the annual contribution limit falling from £255,000 to £50,000 next April. The lifetime annual limit on money that can be built up in a pension fund has also been cut from £1.8m to £1.5m and penalties for exceeding the limit remain onerous. For the time being, high earners will continue to be paid tax relief on contributions at their highest marginal income tax rate. The Government is still consulting on plans by the previous administration to reduce the tax relief on pension contributions for people earning more than £150,000.

So what does all this mean for company directors, high earners and those taking retirement planning seriously?

Quite simply, there has never been a more important time to review pension arrangements for both yourself and your employees.

Our Pensions Team are offering a free, no obligation review. Contact chrisholland@ecsbrokers.com to arrange a meeting.