Salary sacrifice survives
This is a contractual agreement between an employer and an employee to reduce salary/ bonus in lieu of an alternative benefit; typically a pension contribution. Such an agreement results in National Insurance savings for both the employer and employee and it was therefore widely expected that this practice would be abolished in the year’s Budget. Surprisingly, the government’s confirmed this practice will continue to be an option for pension funding.

The birth of the pension dashboard
The chancellor announced that in 2019 a new digital platform will be launched which will provide details of an individual’s entire pension portfolio. While I admire and support the sentiment, I remain unconvinced the dashboard will ever come to light – there are simply too many outdated legacy systems still being operated by insurance companies and pension administrators alike.

Workplace pension advice allowance going up
Employers are generally unaware the government has tried to encourage them to help employees obtain Workplace Pension related advice by allowing a tax and National Insurance free allowance of up to £150 per employee for employer arranged advice. This allowance will be increased to £500 per employee from April 2017, which will hopefully enable lower paid employees to access professional advice.

Pensions advice allowance
A new Pensions Advice Allowance has been proposed, which will allow people under the age of 55 to withdraw up to £500 tax free from their Defined Contribution pension savings and use this towards the cost of financial advice. A consultation process will be undertaken in this regard. Hopefully this will become legislation, as too many people are making poor decisions that are materially affecting their retirement lifestyle. The options available at retirement are numerous and complex. Everyone therefore needs to be encouraged to take professional advice; after all, for most, it will be the second biggest financial decision of their lives.

Changes to Legislation for the seriously ill
Pension tax rules will be relaxed so that those who are seriously ill will be allowed to draw a lump sum from their pension scheme even if benefits are already being received, which is not currently the case. Further, any such payments made to those aged 75 or older will be taxed as income rather than at the current unfair flat rate of 45%.

Under 23 drawdown income rule change
There has been an inadvertent anomaly in pensions legislation resulting in minor dependants’ being prohibited from drawing an income from a drawdown pension when they reach the age of 23. They will now be allowed to continue drawing a pension income post age 23 like other minor beneficiaries. A welcome amendment to an unintended legislation.

Trivial commutation lump sums
It will be possible to pay such a lump sum from a Defined Contribution pension plan that’s already in payment. This has not been allowed to date.

The Budget has certainly been far better than I ever envisaged, with the chancellor righting wrongs and creating a taxation and savings structure that encourages the young and old alike to save for the future. Just as well, as there is a very big savings black hole to be filled, which rightly seems to have been identified by the government as a key threat to our country’s future financial prosperity.

David Smith is a director of financial planning at Tilney Bestinvest.