Spotlight: Autumn Statement 2011

The Chancellor’s Autumn Statement, presented on 30 November, was not dissimilar to some of the previous Government’s pre-Budget reports, confirming a series of relatively small measures, many of which had already been pre-announced.

The areas of most interest to the personal financial services industry will be: pensions, personal taxation, inheritance tax and corporation tax.

The key announcements in these areas – and opportunities arising from them – are summarised below.

The Chancellor had already introduced major changes to pension tax relief in the March 2011 Budget. These are now included in Finance Act 2011. There are also important changes planned under the banner of pensions reform, namely auto-enrolment and NEST from 2012, which are now included in the Pensions Act 2011.

Given that so much has been changing in the pensions world recently it was not surprising that there were no major announcements around pensions in the Autumn Statement. There were however two items worthy of note.

Increase to basic State pension

The Chancellor confirmed that from April 2012 the basic State pension will increase in line with the triple lock guarantee. This means that it will rise

by 5.2%, bringing the full pension to £107.45 pw for a single person, and £171.85 pw for a married couple.

The minimum income guarantee element of pension credit will increase

by 3.9% bringing this to £142.70 pw for single pensioners, and £217.90 pw for pensioner couples from April 2012. The threshold for the savings credit will increase from April 2012 to £111.10 pw for a single pensioner and £177.20 pw for a pensioner couple.

Increase to State pension age

We had warning at the last Budget that the Government was considering proposals for future increases to the State pension age (SPA) to combat future increases in longevity; in his Autumn Statement, the Chancellor confirmed that the SPA will rise from 66 to 67 from 2026, eight years earlier than originally planned.

Those who plan to retire before their new SPA may therefore wish to consider the future retirement income shortfall that this creates or plan to work until their new SPA to avoid this shortfall.

Of course, there are plus sides. If the current system is maintained individuals will make national insurance contributions (NIC) for longer. This may allow those who do not have a sufficient NIC contribution record to build up further entitlement to basic State pension but is of no comfort to those who have already accrued an entitlement to the maximum basic State pension.

Revised carry forward rules

HMRC has changed its guidance on how carry forward works for tax years 2008/2009, 2009/2010 and 2010/2011 – the ‘transitional years’. This will impact all carry forward calculations involving these years.