UK Budget 2015 Expats – how are pensions affected?
The UK Chancellor George Osborne yesterday delivered his final Budget speech before the UK General Election on 7 May 2015. Harrison Brook explains the UK Budget 2015 expats.
Announcements relating to pensions are detailed below, and you can access full Budget details through this link.
Pension Key Points:
- Annuities – Legislation will be introduced in April 2016 to allow people who are already receiving income from an annuity to agree with their annuity provider to assign their annuity income to a third party in exchange for a lump sum or an alternative retirement product. The proceeds of the sale can then be taken directly or drawn over a number of years, and taxed at the marginal rate, in the same way as those taking their pension after April 2015. The consultation document for this initiative can be accessed here.
- Changes to the taxation of inherited annuities (where the policyholder dies under 75) – From April 2015, beneficiaries of individuals who die under the age of 75 with a joint life or guaranteed term annuity will be able to receive any future payments from such policies tax free where no payments have been made to the beneficiary before 6 April 2015.
The tax rules will also be changed to allow joint life annuities to be paid to any beneficiary. Where the individual was over 75 at the time of death, the beneficiary will pay the marginal rate of Income Tax.
- Lifetime Allowance – This will reduce from £1.25 million to £1 million from 6 April 2016 – Transitional protection for pension rights already over £1m will be introduced alongside this reduction to ensure that the change is not retrospective.
The Lifetime Allowance will be indexed annually in line with CPI from 6 April 2018.This measure will impact the 4% of individuals currently approaching retirement that have a pension pot worth more than £1 million.This move is potentially positive for QROPS as a transfer from a UK registered pension scheme into QROPS is a crystallisation event (BCE8) for the purposes of testing the Lifetime Allowance. Thereafter, any funds transferred to QROPS can grow above this threshold without recourse to the Lifetime Allowance charges of 25 & 55%.
- Accessing guidance and key information about pension benefits – The government announced additional funding of £19.5 million in 2015-16 to support the implementation of the new pension freedoms and the new pensions guidance service, Pension Wise.
Do you hold a QROPS, SIPP or existing UK pensions? Speak to a Harrison Brook adviser for no obligation, financial analysis and information on the UK Budget 2015 Expats.