In all the excitement following the Budget announcement, you might have missed the silent passage of the Pensions Bill into the harbour of Royal Assent thus becoming the Pensions Act 2014. We've put together a brief note of some of the main points below, with possible planning points for you to consider.
Charges
Employers with pensions schemes that they want to use for auto enrollment will need to seek advice to make sure they fit within the charge cap, due to be implemented from April 2015.
Auto enrolment
Advisers with clients who have lifetime allowance protection should take comfort that the protection might not be lost if they are not automatically enrolled.
How this works is yet to be decided - it may not be an automatic exception and so will require action from the protected individual and their adviser.
State Pensions
People need to be aware that they might have to revisit their retirement plans and the age at which they plan on retiring.
Some people with pre-exisiting state benefits that are more than the amounts of the new single tier state pension need to be aware that they'll still have to pay national insurance contributions but will not accrue further state benefits.
Automatic Transfers
Small pots of £10,000 will be automatically transferred from one auto enrollment scheme to the next when people move jobs.
This is to be a non-advised process but the transferee will have the option to opt out. Eventually these small pots will become larger, and there will be a need for advice.
Charges
- A charge cap will apply in workplace pension schemes (0.75% is proposed by the DWP)
- New governance requirements will apply to DC pension schemes
- The FCA will work to make charges and transaction costs in some pension schemes transparent and comparable.
Employers with pensions schemes that they want to use for auto enrollment will need to seek advice to make sure they fit within the charge cap, due to be implemented from April 2015.
Auto enrolment
- Certain people will be excluded from auto enrollment (e.g. those with lifetime allowance protection, or very close to retirement)
- Trust-based defined contribution schemes will no longer be abe to offer a short service refund for workers with less than 2 years' service
Advisers with clients who have lifetime allowance protection should take comfort that the protection might not be lost if they are not automatically enrolled.
How this works is yet to be decided - it may not be an automatic exception and so will require action from the protected individual and their adviser.
State Pensions
- The new single tier state pension will start from 6 April 2016
- State pension age will increase from 66 to 67 between 2026 and 2028
People need to be aware that they might have to revisit their retirement plans and the age at which they plan on retiring.
Some people with pre-exisiting state benefits that are more than the amounts of the new single tier state pension need to be aware that they'll still have to pay national insurance contributions but will not accrue further state benefits.
Automatic Transfers
- Requires the Government to lay Regulations to allow the automatic transfer of small pots and allow the merging of pots within the same scheme.
Small pots of £10,000 will be automatically transferred from one auto enrollment scheme to the next when people move jobs.
This is to be a non-advised process but the transferee will have the option to opt out. Eventually these small pots will become larger, and there will be a need for advice.
