The new tax year brings a number of changes to the pensions world, not least the first round of phasing for auto-enrolled employees.
Alongside these, thresholds for pensionable contributions and taxable pay are changing, and the Scottish government's income tax bands diverge from the rest of the UK.
PP rounds up all the changes taking effect today.
Today marks the first part of phasing for automatic enrolment (AE) contributions, with total minimum contribution rates rising from 2% to 5%, made up of a minimum of 2% from the employer and the rest from the employee.
At the same time, the range of qualifying earnings has moved, with the lower earnings threshold rising from £5,876 to £6,032, and the higher earnings threshold shifting from £45,000 to £46,350.
Consequently, an employee earning £10,000 will see their total annual pension contributions soar from £82.48 to £198.40.
Similarly, for someone earning the median full-time wage of £28,758 - as estimated by the Office for National Statistics - total annual contributions will increase from £457.64 to £1,136.30.
Recent research by the National Employment Savings Trust (NEST) found most savers felt about pensions ahead of the rate rise.
But JLT Employee Benefits head of defined contribution (DC) investment consulting Maria Nazarova-Doyle said it was important default funds are high quality.
"Enforcing greater pension contributions will not be the panacea the government hopes it will be," she said. "Whilst greater retirement savings are to be universally encouraged, the benefits of the increase will be eroded significantly if it is not accompanied by a review of the default investment strategy of a DC pension scheme."
2) Take-home pay
The increase in AE contributions will be slightly, but not totally, mitigated by changes to the personal tax allowance and National Insurance (NI) primary threshold, which are both increasing.
The annual personal tax allowance has risen from £11,500 to £11,850, while the weekly NI primary threshold has grown from £157 to £162.
Together, for the majority of savers, these increase take-home pay by £8.43 per month - or £2.60 for savers earning between around £8,400 and £11,850.
Alongside all these, minimum wages for all age groups have risen by between 20 pence an hour to 33 pence an hour, while salaried workers may also receive a pay rise.
Meanwhile the threshold post-2012 graduates must earn before paying back their student loan has risen from £21,000 to £25,000. For pre-2012 graduates, the threshold is rising from £17,775 to £18,330.
Altogether, the take-home pay increase will offset some of the AE rate rise increase.
3) Scottish income tax
Scottish workers diverge from the rest of the UK today as their government increased the number of income tax bands to six in total, compared to four for the rest of the UK.
The new bands are:
- 0% for earnings up to £11,850
- 19% for earnings between £11,851 and £13,850
- 20% for earnings between £13,851 and £24,000
- 21% for earnings between £24,001 and £44,273
- 41% for earnings between £44,274 and £150,000
- 46% for earnings over £150,000
HMRC has confirmed that Scottish employers can continue to apply automatic tax relief at the basic rate of 20% under the new bands, although those employees paying 21% tax will have to separately make a specific claim to gain the extra 1% tax relief.
Brown Shipley Edinburgh head Paul Embleton said the changes will have a "notable impact".
"Overall the changes will mean that anybody earning above £26,000 will pay more income tax than in the rest of the UK," he said. "Scottish savers and investors now enter a more complex environment, as the new income tax rates and bands set a precedent for Scotland that could well see Holyrood move further from the system in the rest of the UK in future years."
4) Lifetime allowance
In November last year, during the Autumn Budget, the Lifetime Allowance (LTA) was confirmed as rising in line with the Consumer Prices Index (CPI) from today.
This means savers will benefit from a 3% uplift - calculated as the inflation between September 2016 and September 2017 - to the LTA, with it rising from £1m to £1.03m.
5) Mandatory disclosure rules
New investment cost and charges disclosure rules have come into force today, requiring trust-based defined contribution (DC) schemes, including master trusts, to publish information to members, beneficiaries and recognised trade unions for all investment options.
The information must be made public on an annual basis, both in a members' annual benefit statement and an online publication, and should include the compounding effect of charges.
Trustees who fail to comply could be fined up to £5,000, while organisations face up to a £50,000 penalty, subject to The Pensions Regulator's discretion.
6) State pension increases
All state pension allowances have also increased today by CPI, as the triple lock continues to apply for both the new state pension and the basic state pension. The additional state pension rises by CPI as default.
This means the basic state pension has grown from £122.30 to £125.95 thanks to the government guarantee that the payment will grow each year at the highest of wage growth, CPI, or 2.5%. As September's CPI figure was 3%, this is the highest amount.
Meanwhile, the additional state pension, which depends on earnings during working life, also increased by 3% up to a maximum of £172.28 per week.
The new state pension, which came into force in 2016, also increased today, growing from £159.55 to £164.35 a week.
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