Pension freedoms for those with annuities

The Chancellor has announced a new flexibility for people who have already purchased an annuity. From April 2016, the government will remove the restrictions on buying and selling existing annuities to allow pensioners to sell the income they receive from their annuity for a capital sum.

Individuals will then have the freedom to take that capital as a lump sum, or place it into drawdown to use the proceeds more gradually.

Income tax at the individual’s marginal rate will be payable in the year of access to the proceeds.

The proposal will not give the annuity holder the right to sell their annuity back to their original provider. The government has begun a consultation on the measures that are needed to establish a market to buy and sell annuities and who should be permitted to purchase the annuity income.

The government recognises that for most people retaining their annuity will be the right choice. However, individuals may want to sell an annuity, for instance to pay off debts or to purchase a more flexible pension income product.

We will keep you informed of developments.

Internet link: GOV.UK News

For more information please do not hesitate to contact Cliff Pocock at Ward Williams Financial Services Ltd on 01932 830664 or by email on wwfs@wardwilliams.co.uk.

The Budget 2015

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Fines for those who fail to comply with Auto Enrolment

The Pensions Regulator (TPR) has issued 166 Fixed Penalty Notices of £400 to employers who failed to meet their obligations in the last quarter of 2014.

The number of employers approaching the date when they must confirm that they have complied with new workplace pensions duties (known as a declaration of compliance) is now beginning to rise significantly as Auto enrolment is rolled out across all employers. In future months, TPR expects to see more employers who, despite the message to prepare early, leave it too late or do not comply at all.

The Pensions Regulator’s Director of automatic enrolment, Charles Counsell, said,

‘My message to all employers is that failing to declare within five months of your staging date means you risk being fined, which is why we recommend you start your automatic enrolment planning and preparation 12 months before staging.

It appears some medium employers waited for a prompt from the regulator before completing their automatic enrolment duties. Employers must complete all their duties including making their declaration of compliance to The Pensions Regulator.’

Experience to date also shows that employers should begin gathering the information they need to complete their declaration of compliance well in advance of their deadline.

If you would like help or advice with auto enrolment please contact us on 01932 830664 or email us at wwfs@wardwilliams.co.uk

Auto enrolment letters and updated thresholds

The Pensions Regulator (TPR) is to write to all small and micro businesses in the coming months as part of a new campaign to give them key information on auto enrolment, including when the duties affect their businesses.

In addition the auto enrolment qualifying earnings bands and earning thresholds have been announced for 2015/16. These thresholds are relevant to employers complying with their automatic enrolment obligations to enrol and then make pension contributions for eligible employees. Employers must meet their obligations from their staging date which can be found by using TPR Website tool.

The revisions in the limits take effect from 6 April 2015 and follow the recommendations from consultation with interested parties.

TPR proposes to revise the limits to the following amounts:

•             £5,824 for the lower limit of the qualifying earnings band

•             £42,385 for the upper limit of the qualifying earnings band

These limits are used by employers to calculate how much pension contributions are due where band earnings are the basis of calculation.

The amount someone must earn to be automatically enrolled into a workplace pension (the earnings trigger) will remain at £10,000 per annum instead of being aligned with the personal allowance as it has been for previous years following concerns that low paid workers will miss out on pension contributions.

If you would like help with auto enrolment please do get in touch by calling 01932 830664 or emailing us at wwfs@wardwilliams.co.uk.  Alternatively you can visit our website www.wardwilliamsfs.co.uk

Internet links: Gov  Press release

Pension wise

The government has announced the launch of ‘Pension wise’ which will offer free and impartial guidance to people on the new pension freedoms which comes into effect in April.

Economic Secretary to the Treasury Andrea Leadsom has unveiled the name and logo of the new pensions guidance service.

Pension wise will offer free and impartial information and guidance to people with a defined contribution pension approaching retirement and will be available from April 2015 for individuals approaching retirement.

Economic Secretary to the Treasury Andrea Leadsom said:

‘People who have worked hard and saved all their lives will be free to choose what they do with their money from next April.

We want people to be empowered to make informed and confident choices and I’m delighted to announce Pension wise: Your money. Your choice as the brand name for the impartial guidance service we are building.

Pension wise will be a first port of call for people with a defined contribution pension who are approaching retirement. It is a distinctive brand, making it easy for consumers to know where to go for help and guidance.’

Internet link: News

Strong demand for National Savings ‘pensioner bonds’

The National Savings & Investments website and helpline are experiencing a high volume of enquiries following the launch of their 65+ Guaranteed Growth Bonds which are being referred to as ‘pensioner bonds’.

The bonds are available for a period of one or three years. The taxable bonds offer savers interest of 2.8% over one year and a fixed annual interest rate of 4% over three years with a minimum investment of £500. Investors are restricted to a maximum investment of £10,000 in each of the two products offered.

The new bonds cannot be held within a New Individual Savings Account (NISA) and only pay interest at the end of the savings term. Where investors cash in their investment early, a penalty equivalent to 90 days’ interest will be applied.

Internet link: NS&I bonds