Public Policy Update - October 2019

Queens Speech

Changes for pension schemes, divorce law and funding of social care were all included in the Queens Speech on 14 October. Now that a General Election has been called it is unlikely that these proposals will be enacted. However some measures may be revived in the new parliament. We will eagerly await the manifestos and will provide further updates on what parties are offering in so far as they affect our personal finances and business.

Key Highlights included:

  1. The Pensions Dashboard will enable savers to see all their pensions in one place and pension providers will be compelled to participate. LEBC welcomes this development to help savers understand their pension savings better and cut down the number of lost pensions, estimated to be worth £20billion [1]. Completion of the Dashboard may take some years. Meanwhile, LEBC is investing in technology to enable better access to pension and savings data, both through the launch of our app Hummingbird and the introduction of a new client portal for secure exchange of information.

  2. A new type of workplace pension scheme which collectivises the investment risk of pension savings to provide a target pension in retirement, which could vary in payment, depending on investment experience. Royal Mail are keen to introduce this but whether other employers will is doubtful.

  3. Tougher rules to prevent rogue employers from neglecting pension provision in workplace schemes with prison sentences of up to 7 years in the worst cases.

  4. The Divorce, Dissolution and Separation Bill seeks to introduce a no-fault divorce process which will speed up applications. It is intended that this process will promote greater collaboration between divorcing parties, making court battles less likely.

Couples will need to agree the financial aspects of their separation earlier, to avoid the pitfalls of losing the financial protection and tax breaks of marriage on receiving the decree absolute, without alternative arrangements in place.

Our Financial Planners use cash flow planning tools to help couples and their lawyers plan for a realistic split of assets. This interactive tool considers various scenarios, taking account of the needs of each party, the impact of taxation and the cost of borrowing. 

  • Social Care Funding got a mention in the Speech, but no details and this topic is expected to feature heavily in the next General Election.  Our Later Life advisers are keenly awaiting the details, so that those requiring care can plan with more certainty.

Probate Fee U Turn

Away from Parliament, the Government announced on 12 October that it’s dropping its controversial plans to increase probate fees. This U turn is welcomed by LEBC which joined others in campaigning against the probate tax. 

High Income Child Benefit Charge

This tax charge  has been criticised as over complex by the Office of Tax Simplification, (OTS) which recommends that the Department for Work and Pensions overhauls the process and paperwork to make it easier for new parents to understand what they can claim and when they may have to pay the tax charge.

One of the complications is that if the child benefit is waived, any non- working parent loses credits for the State pension while they are full time carers. The OTS says that expecting new parents to realise that there is a connection between child benefit and State pension entitlement is unrealistic and that many parents are unaware that they are losing up to £250 per year of retirement income each year.  DWP only permits backdating of pension credits for 3 months. The OTS wants full backdating.  

LEBC has helped many parents restore their right to child benefit on a tax -free basis by the high earner (income over £50,000) making pension contributions to reduce the income assessed for this. 

Pensions Savings Taxation

The OTS calls for the pensions savings tax relief regime to be simplified. It follows the plight of doctors turning down extra shifts, due to the perverse taxation of their pension savings, once their income exceeds £110,000. NHS staff are not alone in having to choose between earning more or reducing pension savings.  The annual allowance taper can lead to large unexpected tax bills, even though the individual’s savings may be well below the Lifetime Allowance of £1,055,000.

LEBC agrees with the OTS that the current rules which restrict tax relief via both an annual allowance and a lifetime allowance are too complex, and reform is needed. Meanwhile we can guide those affected by these restrictions on how to manage their retirement saving and to maximise the tax relief available.

Kay Ingram

Please remember, no news or research item is a recommendation or advice to buy. Aspira is not responsible for accuracy and may not share the author’s views. If you are unsure of the suitability of any investment for your circumstances please contact an adviser. All investments can fall as well as rise in value so you could get back less than you invest. All information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation, are subject to change. Taxation advice is not regulated by the FCA.

Back To List

Submit a comment

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.

Topics

Auto-enrolment? We can help
Get in touch with Aspira