The new tax year brings a number of changes for pensions including the long-awaited name change for the Single Financial Guidance Body (SFGB).
Alongside this, minimum auto-enrolment (AE) contribution rates have increased and the lifetime allowance has also risen. Additionally, there are changes in take-home pay and there is growth in the state pension.
PP rounds up the changes that took place on 6 April.
1) AE contribution rates
Saturday (6 April) marked the second increase in AE contribution rates, with the total minimum contribution rate rising from 5% to 8%. Employers are now responsible for paying a minimum of 3%, while employees are responsible for paying the remaining 5% into their pension pot.
The range of qualifying earnings has moved at the same time, with the lower earnings threshold rising from £6,032 to £6,136 annually and the upper earnings threshold rising from £46,350 to £50,000.
The earnings trigger for AE remains at £10,000.
Government figures recently revealed AE has now brought 10 million savers into occupational pensions since its introduction in 2012.
Following the first rate hike last year, the Department for Work and Pensions unveiled two studies revealing positive employer attitudes towards AE and found support for contribution increases.
2) Take-home pay
The increases in AE payments will be slightly mitigated, but not entirely, by the changes to the personal tax allowance and the National Insurance (NI) primary threshold, which are both increasing.
The annual personal tax allowance has risen from £11,850 to £12,000, while the weekly NI primary threshold has grown from £162 to £166.
For the majority of savers, this will increase take-home pay by around £12.91.
Alongside this, minimum wages for all age groups have risen by between 15 pence an hour and 38 pence an hour.
Altogether, the take-home pay increase will offset some of the AE contribution rate increase, before wage increases are included.
3) Lifetime allowance
The lifetime allowance limit on the amount of pension benefit that can be drawn from pension schemes has risen in line with Consumer Prices Index (CPI) inflation this year, and is expected to increase again at the end of this tax year.
The rate has now grown to £1.05m, from £1.03m last year. However, the overall annual allowance will remain at £40,000, while the money purchase annual allowance remains at £4,000.
4) Money and Pensions Service
As of Saturday, the SFGB took on its new name of the Money and Pensions Service after its rebranding was announced on 4 March by pensions and financial inclusion minister Guy Opperman.
The body was introduced at the beginning of this year unifying The Pensions Advisory Service, Money Advice Service, and Pension Wise under a single structure.
It aims to provide a single source of free and impartial pensions and money guidance.
One of the first tasks for the service will be to host the pensions dashboard when it launches, which is expected to be later this year.
5) State pension increases
State pension allowances have also increased by 2.6% this year as the triple lock system continues to apply for both the basic state pension and the new state pension.
This means the basic state pension has grown from £125.95 to £129.20 a week thanks to the government guarantee that the payment will increase each year by the greater of either annual price inflation as measured by the CPI, earnings growth, or 2.5%.
The new state pension, which came into force in 2016, also increased, rising from a maximum of £164.35 a week to £168.60 a week.
Pensioners on lower incomes who receive pension credit will also receive an increase of 2.6%.
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