In a bid to get the 2017 Finance Bill through Parliament before its dissolution in preparation for the June election, a number of proposed allowances have been cut.
The original Finance Bill of 762 pages was cut to 148 pages so that the opposition parties would agree to it being passed in the wash-up before Parliament dissolves. This strategy worked as the Bill received Royal Assent on 27 April 2017 and became the Finance Act 2017.
But those missing pages contained a number of allowances and exemptions that had already been announced, which many thought (and may have acted upon) were effective from 6 April 2017 and which no longer apply as they didnt make it into the Finance Act. Some key ones for employees, employers and advisers are:
- The increase in tax exemption for workplace arranged pension advice. It was due to rise from £150 per employee to £500 per employee from 6 April 2017 but this increase hasn't been passed and so the exemption now stands at £150 per employee. Employers need to be wary of breaching this limit, as a breach will incur a benefit in kind charge for employees.
- The increase in defined contribution (DC) pension advice allowance. This was scheduled to rise from £500 per DC member to £1,500 (to be used in 3 lots of £500 in 3 separate tax years) from 6 April 2017. This increase was left on the cutting room floor and so this allowance now stands at £500 per DC member.
- The MPAA - the money purchase annual allowance. Where an individual has already started to take taxable pension benefits from a DC scheme, their subsequent pension contributions are capped by the MPAA at £10,000. This was set to reduce to £4,000 on 6 April 2017 but this reduction has been left out of the Finance Act 2017 meaning people in this situation won't know how much pension contributions they can make in 2017/18 tax year.
Of course all or any of these changes could be reintroduced in a future Finance Bill, and backdated to 6 April 2017 but right now this leaves everyone in a quandary and those who may have acted in good faith since 6 April to the supposed revised limits with the question have I breached the limits or not?
For any in this situation it is worth seeking professional advice and for employers it is worth considering how you will communicate this to your staff and make changes to your own pension advice and financial education and communication programmes.
Poll: 58% unaware of the legislative delay to the money purchase annual allowance reduction By Louise Fordham 4th May 2017 11:08 am Employee Benefits poll: More than half (58%) of employer respondents are not aware of the legislative delay to the changes to the money purchase annual allowance (MPAA). A poll of www.employeebenefits.co.uk readers, which received 33 responses, found that 42% of respondents are aware that the reduction to the MPAA was not included in the final version of the Finance Bill 2017 as planned. The MPAA was due to be reduced from £10,000 to £4,000 from April 2017, as announced in the 2016 Autumn Statement. However, it was among the clauses omitted from the Finance Bill in order for it to pass before the close of this Parliament.