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23 Dec 2015

5 pensions changes coming into force in 2016

2015 was a big year for changes in pensions legislation, and there are some significant modifications due to emerge in 2016. The BT website recently summed up the forthcoming changes that savers should be aware of in the New Year. These include:

1. State pension reform

As of 6 April 2016, the new state pension of £155.65 will come into force. Although many British savers are confused about the new state pension amount, and reports suggest that it may actually leave pensioners worse off than they are now, the change is intended to simplify the pension system and allow a more even distribution of benefits.

2. Tax changes

There have already been a number of changes to the taxing of pensions, but further amendments could be announced during the 16 March Budget, such as another taxation review or even a major reform of pension tax relief.

Already on the horizon is the reduction in Lifetime Allowance from £1.25 million to £1 million, and the Annual Allowance adjustment for those on six-figure salaries or more, possibly reducing their maximum contributions eligible for tax relief to £10,000.

3. The end of contracting

In April 2016, we will see the end of contracting out for final salary pension schemes, causing higher National Insurance contributions for those already tied into the schemes. This will mostly affect public sector workers, whose contributions will increase 1.4% on incomes between £8,060 and £42,380.

4. Auto-enrolment

Work pensions are likely to go up a gear in 2016, with large numbers of small organisations signing up to open pensions for their workforce. By the end of next year, half a million employers will have completed their staging.

5. Financial advice

In preparation for the March 2016 Budget, the Treasury and the Financial Conduct Authority (FCA) will put together their report on pension advice and guidance, hopefully driving easier access to simple, affordable financial help. As the year continues, the regulator will publish more guidance on this matter.

Copyright M2 Bespoke 2015

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