Ever since the shock of March 2014, the pensions industry gets very excited every time that the Chancellor is due to stand up in the House of Commons. This time, the Autumn Statement has been trailed heavily in the industry, with speculation about the loss of the tax-free pension commencement lump sum and the death of salary sacrifice. However, for once, very little was forthcoming except a small shift in auto enrolment and a general statement that we should wait until the spring before worrying again.
The statement included the usual details on the increases to the basic state pension (up £3.35 to £119.30). It also formally stated the level of the new, single tier pension, which combines the basic and second state pensions and comes into effect from the next financial year at £155.65.
The only notable change related to automatic enrolment, not strictly a taxation issue but fundamental for employers. Automatic enrolment was brought in by the Pensions Act 2008, commencing roll out in 2012, so allowing three different political parties to claim credit for it. The gradual roll out has commenced from large to small employers and comes to an end in October 2017, by which time all employers will be obliged to automatically enrol employees in the right age bracket, and earning more than the minimum, into a pension arrangement. The minimum contribution rate an employer must pay is presently 1% of earnings, rising to 2% in October 2017 and 3% the year after (with employee contributions rising higher). The Chancellor has announced that the dates for these increases are being pushed back six months to 6 April 2018 and 6 April 2019 respectively. The changes are not significant but are the first to be made to the timetable since the roll out started three years ago, and perhaps open the door for further delays in the future.
Pensions has had a busy few years, particularly in the arena of taxation, so an opportunity to breathe is always welcome. Indeed, when the Treasury's consultation on pensions tax reform, emanating from the Summer Budget, included the stated goal of simplifying pensions taxation to encourage understanding and engagement, many commentators pointed out that the continual change to pensions taxation policy was perhaps the greatest hindrance to understanding. It is not so much that pensions tax is complicated, the argument runs, as that it is never the same from one year to the next. As a result, we should not be churlish that all has been left largely alone for once.
However, although no mention was made by the Chancellor in his speech, the Treasury statement did note that the consultation on pensions taxation reform gave rise to "several hundred" of responses and that a response will be published at the April 2016 budget. We may have had a relaxing autumn, but the spring sounds as if it will be much more exciting.
Rosalind Connor is a partner in the pensions team at Taylor Wessing