Pensions in the Budget
28 June 2010
A summary of the key pensions headlines from the recent Budget.
Limiting tax relief - the annual allowance is to fall to between £30,000 and £45,000 from April 2011. This replaces the Labour government's plan to remove higher rate relief for the highly paid. The new approach will raise the same amount of tax.
Default retirement age of 65 - to be phased out starting from April 2011. The government will consult about how quickly to remove it.
EFRBS - work is to continue on the Labour government's plans (in the March 2010 budget) to apply anti-avoidance measures to trusts used to reduce tax liabilities on rewards to employees and directors. Employer financed retirement benefit schemes will be included in legislation next April.
Compulsory annuitisation at age 75 in DC schemes - to be abolished from April 2011. Until legislation is in place, the compulsory age goes up to 77. This change is of most interest to people with personal pensions.
Public sector pensions - to be reviewed by John Hutton, former Secretary of State at the DWP, in time for next year's budget. He will recommend short term saving measures by September this year.
Other points confirmed - as the coalition agreement already said:
- there will be a review into when state pension age begins to rise to 66,
- the basic state pension is guaranteed to rise by the highest of earnings, prices (CPI) and 2.5% from April 2011, and
- there will be a review of auto enrolment in NEST (particularly in relation to lower earners).