Spring Budget 2017 – Pensions, Savings & Investments

March 9th, 2017

Money purchase annual allowance

The money purchase pension annual allowance will be reduced to £4,000 from £10,000 for 2017/18, following a consultation issued with the Autumn Statement.

Qualifying recognised overseas pension schemes

There will be a 25% tax charge on pension transfers on or after 9 March 2017 to qualifying recognised overseas pension schemes (QROPS). Exceptions will be made to the charge, allowing transfers to be made tax free where people have ‘a genuine need to transfer their pension’ and:

  • Both the individual and the pension scheme are in countries within the European Economic Area (EEA); or
  • If they are outside the EEA, both the individual and the pension scheme are in the same country; or
  • The QROPS is an occupational pension scheme provided by the individual’s employer.

UK tax rules will apply to payments from funds that have had UK tax relief and have been transferred to a QROPS on or after 6 April 2017. The rules will apply to any payments made in the first five full tax years following the transfer, regardless of whether the individual is or has been UK resident in that period.

Changes to tax treatment of foreign pensions

From 6 April 2017, the treatment of foreign pensions will be more closely aligned with the UK’s domestic pension regime, as previously announced. Legislation will clarify that all lump sums paid out of funds built up before 6 April 2017 will be subject to the existing tax treatment.

Master trust tax registration

The tax registration process for master trust pension schemes will be amended to align it with The Pensions Regulator’s new authorisation and supervision regime.

Life insurance policies

As previously announced, the tax rules for part surrenders and part assignments of life insurance policies will be amended to allow policyholders who have generated ‘a wholly disproportionate gain’ to apply to HMRC to have the gain recalculated on ‘a just and reasonable basis’. The changes will have effect from Royal Assent.

NS&I Investment Bond

The rate on the new NS&I Investment Bond announced at Autumn Statement 2016 will be 2.2%. The bond will have a three year term and will be available for 12 months from April 2017. It will be open to anyone aged 16 and over, subject to a minimum investment of £100 and a maximum of £3,000

Capital gains tax

The annual exempt amount (AEA) for individuals and personal representatives will rise to £11,300 for 2017/18, while the AEA for most trustees will increase to £5,650 (minimum £1,130).

Inheritance tax

The nil rate band remains at £325,000. New deemed domiciled rules apply from 6 April 2017 for inheritance tax (as well as income tax and capital gains tax).