Foreign pensions abuse clampdown
Dividend allowance cut makes ISAs and SIPPs more important for investors
National Insurance hit for the self-employed
MPAA remains on the chopping board
Pension tax relief left alone
Tom Selby, senior analyst at AJ Bell, comments:
Foreign pensions abuse clampdown
“QROPS transfer requests on or after 9 March will be hit with a 25% tax charge. Broadly, it look like there will only be an exemption to the tax charge where the individual and pension savings are in the same country, both are in the European Economic Area, or the QROPS is provided by the individual’s employer.
“QROPS were originally designed to make it easier for people leaving the UK to retire to another country and take their pension with them. However, the structure has increasingly been manipulated by those looking to artificially cut their tax bills.
“The introduction of a 25% levy for transfers to a country where the individual is not residing should act as a severe deterrent to abuse of the system.”
Dividend allowance cut makes ISAs and SIPPS more important for investors
“The annual dividend allowance has been put to the sword by Philip Hammond less than a year after his predecessor George Osborne introduced it. The cut from £5,000 to £2,000 in April 2018 will make it even more important that investors make full use of the tax allowances available through ISAs and SIPPs. In particular investors will need to think carefully about which investments they hold inside and outside of tax wrappers. They will want to ensure that high dividend paying investments are held within ISAs and SIPPs to minimise the impact of the dividend allowance cut.”
National Insurance hit for the self-employed
“The introduction of the single-tier state pension in April 2016 was a game changer and, with employed and self-employed workers now getting the same pension out of the system, it makes sense that they also put the same in through National Insurance Contributions.
“Pensions for the self-employed will remain a big issue in 2017, with a review of automatic enrolment set to assess how this significant group of people can be brought into the private pensions system.”
MPAA remains on the chopping board
“It’s disappointing the Money Purchase Annual Allowance remains on the chopping board. The cut flies in the face of the pension freedoms. People are being encouraged to use their savings flexibly and yet when they do so they are punished with a drop in their annual allowance from £40,000 to £4,000. This will affect large chunks of middle Britain, many of whom might need to catch up for the years when they have failed to save enough for retirement.”
Pension tax relief left alone
“It is a welcome relief the Chancellor managed to resist the elixir of the pension tax relief honey pot. Any action here would have been a retrograde step at a time when people need as much encouragement as possible to save for their retirement. Whether this is evidence of a Chancellor putting an end to incessant tinkering and taking a long term view or simply a stay of execution remains to be seen.”