Autumn Statement 2016 – Savings & Pensions

November 29th, 2016

Starting rate for savings

The band of savings income that is subject to the 0% starting rate will remain at its current level of £5,000 for 2017/18.

Money purchase annual allowance

The money purchase annual allowance (MPAA) applies to individuals who have drawn any income benefits under the current pension flexibility rules. It was designed to limit pension income being recycled as fresh, tax-relieved pension contributions. The MPAA was initially set at £10,000 and will be reduced to £4,000 from April 2017, but there may be some exemptions following consultation.

Foreign pensions

The tax treatment of foreign pensions will be more closely aligned with the UK’s domestic pension tax regime by:

  • Bringing foreign pensions and lump sums fully into tax for UK residents, to the same extent as domestic ones.
  • Closing specialist pension schemes to new saving for those employed abroad (s.615 schemes).
  • Extending from five to ten years the period for UK taxing rights over recently emigrated non-UK residents’ foreign lump sum payments from funds that have had UK tax relief.
  • Aligning the tax treatment of funds transferred between registered pension schemes.
  • Updating the eligibility criteria for foreign schemes to qualify as overseas pensions schemes for tax purposes.

Social investment tax relief (SITR)

From 6 April 2017, the amount of investment that social enterprises can raise through SITR will increase to £1.5m if they are no more than seven years old. Certain activities, including asset leasing and on-lending, will be excluded. Investment in nursing homes and residential care homes will be excluded initially, but the government intends to introduce an accreditation system to allow these investments to qualify in the future. The limit on the number of employees will be reduced to 250 full-time equivalent.

Offshore funds

Performance fees incurred by offshore funds will not be deductible against reportable income from April 2017 and instead they will reduce any tax payable on disposal gains.

National Savings and Investments (NS&I) bond

For one year from April 2017, NS&I will offer a new ‘market leading’ three-year savings bond. The indicative rate is 2.2% but this may be adjusted to reflect market conditions at launch. The bond will be open to people aged 16 and over, subject to a minimum investment of £100 and a maximum of £3,000.

Life insurance policies

Legislation will be introduced in the Finance Bill 2017 and will be effective from 2017/18, to counter the disproportionate tax charges that can currently arise in certain circumstances from life insurance policy part surrenders and partial assignments. This has been previously announced.

Personal portfolio bonds

The government will create the power to amend by regulations the list of assets in which life insurance policyholders can invest without triggering tax anti-avoidance rules. The changes will be in the 2017 Finance Bill and will take effect from Royal Assent.

ISA, Junior ISA and Child Trust Funds

The annual subscription limit for Junior ISAs and Child Trust Funds will increase to £4,128. The main ISA subscription limit will increase to £20,000, as previously announced.