News
2008 Budget
In his first Budget, Chancellor Alistair Darling announced, among other things, the following changes to occupational pension schemes:
Key Budget announcements
The new Budget confirmed that the lifetime allowance would be increased by £50,000 to £1.65 million and the annual scheme allowance would be lifted by £10,000 to £235,000.
Mr Darling also scrapped the 10% starting rate of tax for pensions and earned income, reduced the basic rate of income tax by 2% and increased the upper earnings threshold for National Insurance contributions from £34,840 to £40,040.
These changes took effect from 6 April 2008.
Trivial commutation
The government has announced some changes to the trivial commutation rules. Although we’ll have to wait for draft regulations, it appears that, on top of the existing provision that allows commutation where the value of all pension funds is not more than 1% of the standard lifetime allowance, it will also be possible to fully commute:
- small 'stranded pots' which would include, for example, small funds arising after someone had taken other benefits under a trivial commutation exercise and which wouldn’t be able to be commuted under the current rules
- savings in occupational pension schemes where the total value falls below £2,000 (this provision doesn’t apply to personal pension schemes)
The news on stranded pots is welcome, but it’s disappointing that the additional £2,000 trivial commutation limit has only been made available to occupational pension schemes. A-day was about creating one tax regime for all types of registered pension schemes, and this measure unfortunately creates an unwelcome division.
You can find more information about the 2008 Budget on HM Revenue & Customs website at:
http://www.hmrc.gov.uk/budget2008/index.htm
