Lifetime Allowance
The government will reduce the lifetime allowance for pension contributions from £1.25million to £1million from 6 April 2016. Transitional protection for pension rights already over £1million will be introduced alongside this reduction to ensure the change is not retrospective. The lifetime allowance will be indexed annually in line with CPI from 6 April 2018. CIPP comment Whilst disappointing the life time allowance is to be cut further (not that it was a surprise and to be honest most payroll professionals are unlikely to reach the limit anyway) we are pleased the annual allowance isn’t to be cut. Many CIPP members couldn’t understand the government’s motive for reducing these allowances if they want to encourage people to save for their retirement and not opt out of their pension scheme.
National Minimum Wage
As published this week it was confirmed that the recommendations of the Low Pay Commission to increase adult, and age related rates along with an increase to the accommodation offset had been accepted. The government also accepted the recommendation that the apprentice rate should not apply to Higher Apprentices. However, the government rejected the recommendation that the apprenticeship rate should increase by 7p per hour, instead favouring an increase that will halve the gap that currently exists with the age rate for 16-17 years olds. The recommendation that the government should commit to further consultation on the proposed approach for simplification to the apprentice rates structure, before making any legislative change was also accepted. The Chancellor also said that the aim is for the NMW adult rate to increase to over £8 by the end of the decade.
From 1 October 2015: the adult rate will increase by 20 pence to £6.70 per hour
the rate for 18 to 20 year olds will increase by 17 pence to £5.30 per hour the rate for 16 to 17 year olds will increase by 8 pence to £3.87 per hour the apprentice rate will increase by 57 pence to £3.30 per hour the accommodation offset increases from the current £5.08 to £5.35 (£37.45 a week )
CIPP comment Increasing the NMW beyond those recommended by the Low Pay Commission for apprentices will, we hope encourage more young people to consider an apprenticeship. The CIPP also expresses caution after some large organisations have said it might mean they cannot take on as many due to the additional 57p increase.
Umbrella companies and employment intermediaries
Autumn Statement 2014 announced that the government would review the growing use of overarching contracts of employment that allow some temporary workers and their employers to benefit from tax relief for home-to-work travel expenses, relief not generally available to other workers. This is unfair and as a result of the review, the government will change the rules to restrict travel and subsistence relief for workers engaged through an employment intermediary, such as an umbrella company or a personal service company, and under the supervision, direction and control of the end-user. This will take effect from April 2016 following a consultation on the detail of the changes. Stakeholders have also raised concerns that individuals do not understand how their take-home pay is affected by these arrangements. The government wants employment intermediaries to provide workers with greater transparency on how they are employed, and what they are being paid. The Department of Business Innovation and Skills will consult on these proposals on transparency later this year. CIPP comment The Chancellor’s one liners regarding zero hours and intermediaries claiming travel and subsistence came as no surprise. The CIPP will be watching the legislation changes on this and will advise members accordingly.
Additional flexibility for pensioners
Up to five million pensioners will be given the freedom to sell their annuity for a cash lump sum. From April 2016, people who already have an annuity will be able to now effectively sell it on, so that they too can benefit from the pension freedoms announced at last year’s Budget. Currently, people who have bought an annuity are unable to sell it without having to pay at least 55% tax on it. From April 2016, the tax rules will change so that people who already have income from an annuity can sell that when they choose and will pay their usual rate of tax they pay on income, instead of 55%.
CIPP Policy News Journal
25/04/2016, Page 163 of 453
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