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Monday 1 May 2023 Henry Tapper - Pension PlayPen 1
Budget update & reaction – what this means for pensions
Henry TapperFounder Pension PlayPen
Monday 1 May 2023 Henry Tapper - Pension PlayPen 2
Overview
What’s new• Lifetime ISA • Hike in employer contributions
to public pensions (c2%)• FAMR Changes to advice • Income and CGT and corporate
tax rates• Restructure of
MAS/TPAS/Pensionswise
What stays the same• Pension tax relief• Pension salary sacrifice• LTA and Annual Allowance• Neutral to payroll• Neutral to auto-enrolment• Neutral to take-home
Monday 1 May 2023 Henry Tapper - Pension PlayPen 3
Lifetime ISAFeature• £4,000 limit (overall limit £20k)• Save Four get one free• Available to 50• Not a workplace ISA• Top-up pays out when you buy your
first house• Top up pays out when you get to 60• Top up repayable +interest + 5%
otherwise• You may be able to borrow against it
Impact• Targets smaller savers• Properly marketed• “Pensions are for older people”• Targets individual pensions/SIPPs• Est. 0.3% on value of house by 2021*• Incentivises long-term saving• Penalises feckless spending• Like a US 401k plan?
• *Andrew Handedly- Prospect
Monday 1 May 2023 Henry Tapper - Pension PlayPen 4
How this Lifetime ISA works
Monday 1 May 2023 Henry Tapper - Pension PlayPen 5
The £2bn raid on employer’s pension costsFeature• Change in Scape discount rate• Reduction by 0.2%• Scape covers public sector
unfunded• “Affordable within spending
plans”
Impact• Deficit funding required• Cost to employer = +2% of payroll• Funded LGPS may be affected• Knock on impact on other
benefits/salaries/services
Monday 1 May 2023 Henry Tapper - Pension PlayPen 6
FAMR advisory changes
Feature• Advisory benefit in kind
concession increased from £150 to £500 (including VAT)
• Money can be deducted from the pension pot (for under 55’s)
• (advice/guidance definitions to change)
• Pensions dashboard by 2018
Impact• Improves scope of
advice/guidance deliverable at no employee cost
• Advice relatively painless• Financial education becomes
relatively mainstream?• Onus on Providers to raise game
Monday 1 May 2023 Henry Tapper - Pension PlayPen 7
Rationalising TPAS/MAS/Pensions WiseFeature• Two units – Pension guidance
and Money guidance• Pensions unit with DWP and
“Money” with Treasury• Service to be “front line”• Money guidance(debt) Slimmed
down MAS
Impact• Power shift to pensions• Pensions guidance stays with
DWP• More TPAS than MAS• Less overall resource
Monday 1 May 2023 Henry Tapper - Pension PlayPen 8
Personal and corporate taxes
Feature• Increases in marginal rates NRB -
£11,500, HRB - £45,000• CGT down to20% and 10% from
28% and 18% • Business rates slashed• Redundancy payments subject
to NI (>£30,000)
Impact• Increase in AE contributions,
pays to be in work• Improves value of share based
employee benefits• 630,000 SMEs to pay no “rates”• Boost to pensions as
terminations paid in pensions• No pension nasties
Monday 1 May 2023 Henry Tapper - Pension PlayPen 9
What does this mean to payroll?
Feature• No changes to pension tax-relief• Clamp-down on offshore payroll• Lifetime ISA• Class 2 Nics. Abolished• Changes in the AE band• Lifetime ISA
Impact• Relief for in-house and bureaux• Boost for UK payroll• Not a workplace ISA (yet)• A boost for self-employment?• Continued confusion re net/pay
and annual allowance.• More member queries (from the
millennials)
Monday 1 May 2023 Henry Tapper - Pension PlayPen 10
What does this mean to auto-enrolment?Feature• Lifetime ISA • Hike in employer contributions
to public pensions (c2%)• FAMR Changes to advice • Personal and corporate tax rates• Restructure of
MAS/TPAS/Pension wise• No change to tax relief
Impact• Opt-outs for under 40s• Pressure to offer pension/salary flex
(Oxleas NHS trust)• AE more attractive to IFAs• Improve SME affordability (tough on
re-enrollers)• capacity relieves for member services• Net pay problems persist
Monday 1 May 2023 Henry Tapper - Pension PlayPen 11
What does this mean for pensions?
Feature• Lifetime ISA • Hike in employer contributions
to public pensions (c2%)• FAMR Changes to advice • Income and CGT and corporate
tax rates• Restructure of
MAS/TPAS/Pensionwise
Impact• Threat to accumulation (dry-rot)• Threat to affordability• More advice/education in the
workplace• Scope for higher corporate
contributions• Pensions likely to be better
served
Monday 1 May 2023 Henry Tapper - Pension PlayPen 12
What’s to come• Budget does not address the £21bn cost to Income tax• Budget does not address the £14bn lost to national insurance• Impact on budget balance of auto-enrolment strains budget balance• Tax-relief continues to favour top 10% of earners• Problems for low earners in net pay schemes persist• Current system (AA taper/PIPs) widely considered unsustainable• RTI and Scheme Pays remain best means of tax collection for pensions• “Payroll has suffered enough”
Monday 1 May 2023 Henry Tapper - Pension PlayPen 13
Technical changes to Pension Freedoms re-aligning tax on serious ill-health and death benefit lump sums for those aged<75
making serious ill health lump sums taxable at an individual’s marginal rate for individuals aged 75 and over
legislating to convert dependents' flexi-access drawdown accounts to nominees’ accounts when dependents turn age 23, so they do not have to
take their funds as a lump sum taxed at 45%
legislating to allow DC pensions already in payment to be paid as a trivial commutation lump sum, where total pension savings would be under £30,000
making top ups to fund dependents' death benefits authorised payments
removing unnecessary legislation relating to charity lump sum death benefits.
appendix
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