A pensions weekend
Details
As we look forward to the weekend, so too should we prepare for the legislative changes set to be introduced.
The end of this tax year is Friday 5 April 2019. Saturday 6 April 2019 will therefore see the implementation of a host of changes to pensions for 2019-2020 tax year. The below sets out some of the key changes.
Allowances and rates
a. Auto-enrolment rates
From 6 April 2019, total minimum contributions are increasing from 5% to 8%, with mandatory employment contributions rising from 2% to 3% of qualifying earnings.
Millions of workers have joined workplace pension schemes since auto-enrolment has been introduced. The increase sets to test the strength of the enrolment scheme, forcing workers to pay a further 2%. Many will watch closely to see whether the success of the scheme continues.
b. Lifetime allowance
For the tax year 2019-2020, the lifetime allowance will increase to £1,055,000 (£1,030,000 for 2018-2019). This increase reflects the rise in CPI for the 12 months to the end of September 2018.
c. State pension rates
With effect from Monday 8 April 2019, there will be changes to the state pension rates.
Basic state pension - The full weekly rate of basic state pension (payable to existing pensioners who reached state pension age before 6 April 2016) will rise from £125.95 to £129.20; an increase of £3.25 a week, and £169 a year.
New state pension - The full weekly rate of the new state pension will increase from £164.35 to £168.60; an increase of £4.25 per week, and £221 a year.
Additional state pension - The cap is set to rise from £172.28 to £176.41 per week.
End of transitional period for formerly contracted-out schemes
From 6 April 2019, a range of legislative provisions and the easement for previously contracted out salary related schemes will cease. These changes reflect the end of the transitional period adopted on 6 April 2016 when contracting out on a salary-related basis was abolished.
The easement has permitted employers of schemes that satisfied the contracting out conditions on 5 April 2016 to apply the cost-of-accruals test at scheme level, even if there was a material difference in the cost of the benefits accruing to different groups of relevant members. Instead, such schemes will now need to comply with either of the alternative quality requirements set out in S.23 or S.23A Pensions Act 2008.
Brexit
We expect to see some changes to regulations, at the least to ensure UK pensions legislation will operate effectively on leaving the European Union. As progress unfolds as to our exit route, we will continue to keep you informed of any expected changes.
More information
Should you require any further detail on the information provided, please contact Barry Gibb.
