Today, the Chancellor of the Exchequer, Philip Hammond delivered his Autumn Budget Speech.
From a pensions perspective there were no surprises which was largely good news, particularly given some of the rumours around changes to tax relief.
Lifetime Allowance
This is confirmed to increase by CPI on 6th April 2018. We know the increase will be 3% as the CPI figure for the most recent September is used to calculate the increased amount.
Therefore, for those without any transitional protection they will see their Standard Lifetime Allowance rise from £1M to £1,030,000 next April.
Remember, it may still be possible to apply for Fixed Protection 2016 or Individual Protection 2016, depending on client circumstances.
State Pensions
The so-called ‘triple lock’ means that State Pensions will increase by 3% from next April. This equates to £3.65 per week for the full basic State Pension, and £4.80 per week for the full new State Pension.
The benefits of the triple lock will also be passed on the the poorest pensioners, via an increase to the Standard Minimum Guarantee in Pension Credit to match the cash rise in the basic State Pension. This will be paid for through an increase in the Savings Credit threshold.
Incentivising Long Term Investments
The Chancellor briefly mentioned that The Pensions Regulator has been asked to clarify rules which might otherwise prevent pension funds from investing over the longer term, in things like infrastructure projects.
We await further details although we believe this is aimed at pension schemes with long term funding liabilities, such as defined benefits schemes. Also, use of the word ‘clarification’ doesn’t suggest a major change, but we will wait and see.
Master Trust Legislation
In a document issued today, it was confirmed that the Master Trust Legislation will go ahead from 6th April 2018.
We do not know whether multi-employer SSAS arrangements will be caught up in this, a possible unintended consequence of the way the legislation was previously drafted. We will look at the detail to see whether this could be a problem for such schemes.
Freezing Indexation Allowance for Companies
There was a small but significant change announced with the removal of indexation allowance for companies from January 2018.
Usually, when companies sell an asset such as commercial property at a profit, they are able to take into account the effects of inflation via ‘indexation allowance’ when calculating any taxable profits for the period between acquisition and disposal. Indexation allowance takes into account Retail Prices Index (RPI) which is normally higher than Consumer Prices Index ((CPI).
The Budget announcement means indexation allowance will effectively be frozen at 1 January 2018, meaning gains up until that time will benefit from it, but there will be no further adjustments to it after that date.
The removal of this allowance may take a number of years to be fully appreciated, however it does mean that the tax benefits of using SIPP or SSAS funds to invest in commercial property are now even greater.
November 22nd, 2017
The Minerva SIPP can invest in a wider range of assets including commercial property and land, on an individual or group basis. Any combination of permitted investments may be made within a Minerva SIPP including deposit accounts, DFM, open market platform/wrap accounts, stockbroker accounts and trustee investment plans, all held together within the same SIPP.
SIPP Lite is a lower cost option, for those that do not require multiple investment accounts, or access to commercial property and land at outset. SIPP Lite members are restricted to a maximum of one investment account, to run alongside the default SIPP bank account. This investment account could be another bank account or ONE of the following: stockbroker account, DFM, open market platform/wrap account or a trustee investment plan. For individuals that require additional investments at a later date, including commercial property and land, they can upgrade their SIPP Lite plan to a Minerva SIPP.
A Small Self-Administered Scheme (SSAS) is a type of UK registered pension scheme. Each SSAS is governed by its own trust deed and rules and is a separate legal entity to the sponsoring employer. The sponsoring employer establishes the SSAS and invites members to join. Any individual employed by the sponsoring employer (or a participating employer) may join the scheme and all members are appointed as trustees alongside the professional trustee. SSAS trustees have a very wide range of investment options, including the ability to make secured loans to the sponsoring employer of up to 50% of the net asset value of the scheme, subject to certain conditions.
We have been operating in these markets for over 20 years. The SSAS business was formed in 1997, and in 2003 we launched our flagship product, the Minerva SIPP. The range is completed by SIPP Lite, which has been available since July 2012.
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