Pensions and savings

Pension reforms

The Chancellor re-announced many of the measures currently before Parliament in the Taxation of Pensions Bill. However, he also announced one further change from 6 April 2015 for pension annuities. The 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. The tax rules will also be changed to allow joint life annuities to be passed on to any beneficiary.

State pensions

The basic state pension will be increased by 2.5%. The standard minimum income guarantee in pension credit will rise by the £2.85 a week cash increase in the basic state pension. As a consequence of this increase the full single tier state pension will rise to at least £151.25 per week.

Changes to notional income rules

To assess means-tested benefits for those over the pension credit qualifying age, there will be a change to the notional income rules applied to pension pots which have not been accessed, or have been accessed flexibly, from 150% to 100% of the income from an equivalent annuity would offer, or the actual income taken, if higher.

Pension tax relief - the age 75 rule

Following informal consultation since the Budget, the government has decided not to alter the age limit at which tax relief can be claimed on pension contributions. This will remain at age 75.

Venture capital changes

The government will seek EU approval to increase the investment limit for social investment tax relief (SITR) up to a maximum of £15 million per organisation and to extend the relief to small-scale community farms and horticultural activities. The changes will come into effect on or after 6 April 2015, subject to state aid clearance. Special purpose vehicles for subcontracted and spot-purchase social impact bonds will be made eligible for SITR through secondary legislation in autumn 2015. The government will consult in early 2015 on introducing a Social Venture Capital Trust (VCT).

All community energy generation undertaken by qualifying organisations will be eligible for SITR with effect from the date of the expansion of SITR, at which point it will cease to be eligible for the Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS) and VCTs.

All other companies benefiting substantially from subsidies for the generation of renewable energy will be excluded from also benefiting from EIS, SEIS and VCTs with effect from 6 April 2015.

Individual savings accounts (ISAs)

From April 2015, the ISA allowance will rise to £15,240.

If an ISA saver in a marriage or civil partnership dies on or after 3 December 2014, their spouse or civil partner will effectively inherit their ISA tax advantages. From 6 April 2015, surviving spouses will be given an additional ISA allowance equal to the deceased’s ISA savings on top of their usual allowance.

Peer to peer lending

A new relief will be introduced allowing individuals who lend through peer to peer (P2P) platforms to offset any losses from loans which go bad against other P2P income. It will be effective from April 2016 and individuals will be able to make a claim for relief on losses incurred from April 2015. The introduction of a withholding regime for income tax to apply across all P2P lending platforms from April 2017 will be the subject of a future consultation.