6 April is the start of the new tax year. It is also a common commencement date for legislative changes. This year, key changes affecting pensions from 6 April 2019 (unless otherwise stated) include:
- The default minimum contribution rates payable under an automatic enrolment scheme are increasing from 5% of qualifying earnings to 8%, with at least 3% being payable by an individual’s employer.
- The automatic enrolment minimum contribution rates are also increasing where contributions are paid by reference to basic pay or all earnings.
- The qualifying earnings band is being adjusted with the lower threshold increasing from £6,032 to £6,136 and the upper limit increasing from £46,350 to £50,000. The auto-enrolment eligibility trigger remains fixed at £10,000.
- The scheme level cost of accruals easement that has been available to formerly contracted-out salary-related schemes since contracting-out ended on 6 April 2016 is coming to an end. This means that from 6 April 2019 schemes that have relied upon this easement will need to comply with either the alternative quality requirements or the test scheme standard.
- The standard lifetime allowance for the 2019/20 tax year will be £1,055,000.
- Section 307 of the Income Tax (Earnings and Pensions) Act 2003 is set to be amended by the Finance Act 2019 to ensure that the provision by an employer of a retirement or death benefit in respect of an employee will be taxed as a benefit in kind where those benefits are paid to individuals who are currently out of scope or to a registered charity. Contributions are currently only tax-exempt where the benefit is payable to the employee or a member of the employee’s family or household.
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- The existing requirements that apply to schemes that provide money purchase benefits are being extended so that trustees of such scheme will also be required to disclose certain information about pooled funds on request, including the international securities identification number allocated in relation to each collective investment scheme in which assets are directly invested on behalf of a member at the relevant time. Scheme websites and annual benefit statements must also refer to how this information may be obtained.
- The new single financial guidance body will be named the Money and Pensions Service (MPS). References to The Pensions Advisory Service that appear in existing pensions legislation will be updated to refer instead to the MPS.
- From 1 April 2019, the PPF compensation cap is rising from £39,006.18 to £40,020.34.
- The full weekly rate of the new state pension will increase from £164.35 to £168.60 from 8 April 2019.
- The full weekly rate of the basic state pension (payable to pensioners who reached state pension age before 6 April 2016) will rise from £125.95 to £129.20 with effect from 8 April 2019.
- Certain statutory provisions that were saved when salary-related contracting-out was abolished in April 2016, will cease to apply from 6 April 2019. This includes provisions relating to the issue, cancellation, variation or surrender of a contracting-out certificate, the payment of contributions equivalent premiums (CEPs) and HMRC’s powers to supervise formerly contracted-out schemes. Some saved provisions will continue to have effect indefinitely, including those permitting the payment of CEPs in limited circumstances.