Commenting on today’s budget, Peter McPherson, Senior Technical Advisor with Capita Employee Benefits, said: “On state pension reform, the Chancellor confirmed what he said over the weekend – that the state pension would be increased to a flat rate of £144 per week from 2016. While this is welcome news for imminent pensioners, it is an ambitious timetable and we hope that government is able to meet it. Defined benefit schemes would, of course, be affected earlier as defined benefit contracting out would end at the same time.
“The reduction in the rate of corporation tax – to be funded by an increase in the bank levy – to just 20p was further good news. This change will not only help firms of all sizes to invest in growth and employment but it should also help absorb some of the inevitable costs attached to positive changes like auto enrolment. The personal allowance will be increased to £10,000 from next year, earlier than expected, and we hope that this will also be accompanied by a revision of the earnings trigger for automatic enrolment into pensions.
“In a surprise move, the Pensions Regulator will be given a new statutory objective to take into account the growth prospects of employers when considering funding recovery plans. This follows a recent consultation on this issue and the possibility of introducing smoothing the valuations. Our view is that this was not explicitly required because the Pensions Regulator already did this. We support the decision not to take smoothing any further, but are of the view that the statutory funding regime requires more flexibility.
Finally, some commentators had anticipated a further reduction in the annual and lifetime tax-free allowances for pension contributions. We are pleased that, instead, the limits will stay at £40,000 per annum and £1.25 million in total as a further reduction would have undermined the Government’s attempts to create a savings culture.”
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