PENSION RATES 2013 – 2014

Pension 2013 – 2014 Main announcements

1. Pensions tax relief

As announced in the Autumn Statement 2012, legislation will be introduced in Finance Bill 2013 to reduce the annual allowance to £40,000 and to reduce the standard lifetime allowance to £1.25 million for the 2014-15 tax year onwards. Following consultation, draft legislation for the restriction to the lifetime allowance has been revised to include various minor adjustments and several consequential changes in connection with previous protection regimes.

2. Pensions tax relief – individual protection

Following the previous announcement at Autumn Statement 2012 on the reduction to the standard lifetime allowance (LTA) for pension contributions the Government announced at Budget 2013 that it will offer an individual protection regime in addition to the fixed protection regime.

Individual protection and fixed protection will apply when the standard LTA is reduced from £1.5 million to £1.25 million for 2014-15 and subsequent tax years. The Government will consult on the detail of this individual protection regime in Spring 2013 and legislation will be included in Finance Bill 2014.

3. Pensions drawdown policy (effective from 26 March 2013)

As announced in the Autumn Statement 2012, legislation will be introduced in Finance Bill 2013 to increase the capped drawdown limit for pensioners of all ages with these arrangements from 100 per cent to 120 per cent of the value of an equivalent annuity. Following consultation, the legislation has been revised to remove the rule requiring the maximum drawdown pension to be recalculated after a pensioner with transitional protection from the Finance Act 2011 rules, transfers to another scheme, so ensuring that transfers do not affect the capped drawdown limit.

These changes will have effect from 26 March 2013.

4. Pensions tax: abolition of contracting out

As announced in Budget 2012, legislation will be introduced in Finance Bill 2013 to bring tax legislation into line with Department of Work and Pensions legislation which abolished contracting out through a defined contribution pension scheme from 6 April 2012. Following consultation, the legislation has been revised to clarify the types of payment that would be considered a ‘member’s contribution’ for the purposes of a short service refund lump sum.