Single-Tier Pension Rescheduled

The reductions to the annual allowance and lifetime allowance from 2014/15 were re-affirmed in the Budget. The Chancellor also confirmed that you will have a choice of two transitional protections if the lower lifetime allowance of £1.25 million could affect you. Further details are now awaited.

A great many more people will be affected by another change revealed by the Chancellor; the introduction of the new single-tier state pension from April 2016, one year before the earliest date suggested by the Department for Work and Pensions (DWP) in January. The DWP tried to justify the Chancellor’s move by saying in a press release after the Budget that “every woman affected by the changes we have made to the State Pension age in this parliament will also now have access to the new State Pension”. In truth, as the Institute for Fiscal Studies pointed out, the accelerated start date “may have been driven as much by a consideration of additional National Insurance revenues it will bring in as by any zeal to spread the benefits of the new pension more quickly.”

There was an announcement of a review of the basis for the income drawdown rate, alongside the new 120% limit, which takes effect for drawdown anniversaries from 26 March 2013. It is unlikely the review will make any significant changes beyond a small drop in rates.

The one surprise on the pension front was that the Treasury would “explore with interested parties whether the conversion of unused space in commercial properties … to residential use could be encouraged” by making changes to the self-invested pension rules. At present such pension arrangements are subject to penal tax if they invest in residential property.

The value of your investment can go down as well as up and you may not get back the full amount you invested.

19th April 2013