The pensions landscape

Let’s take a look at some of the changes taking place in the pensions arena that could affect you and/or your employees.
  1. Automatic enrolment - increase in statutory minimum contributions
  2. Expected change in State pension age
  3. Expected change in minimum pension age
  4. Proposed changes to auto enrolment
  5. Increase in lifetime allowance
  6. Tax changes for Scottish rate taxpayers
  7. Tax changes for Welsh rate taxpayers
  8. GDPR changes

 

 1. Automatic enrolment – increase in statutory             minimum contributions

The change

The statutory minimum contributions to auto enrolment pension schemes are increasing from April 2019.

The impact

All auto enrolment pension schemes must meet at least the statutory minimums by this date or they will no longer be a qualifying auto enrolment scheme.

Date7% of all earnings*  8% of pensionable salary, provided 85% of total payroll* is pensionable9% of pensionable salary9% of qualifying earnings
Total must be at leastEmployer must contributeTotal must be at leastEmployer must contributeTotal must be at leastEmployer must contributeTotal must be at leastEmployer must contribute
6 April 2018 to 5 April 2019 5% 2% 5% 2% 6% 3% 5% 2%
From 6 April 2019 7% 3% 8% 3% 9% 4% 8% 3%

* Earnings must include everything that’s included in the definition of qualifying earnings

Back to top


  2. Expected change in State pension age 

The change

The government published a review announcing its intention to increase the State Pension age from 67 to 68 between 2037 and 2039, bringing it forward by seven years from its current legislated dates of between 2044 and 2046.

The impact

The government recognises the need to provide certainty and transparency for future pensioners. So employers might need to support older people who choose to work for longer and those who request to work flexibly. The State pension must be part of a wider package that encourages people to plan for their retirement, enables people to work for longer where they can and supports people who cannot work.

Back to top


  3. Expected change in minimum pension age 

The change

It's currently proposed that the normal minimum pension age (the earliest age a member might be able to take their pension savings) should increase from age 55 to age 57 in 2028. It would increase at the same rate as the increase in the State Pension age from then on.

The impact

This means that the minimum pension age would remain ten years below State Pension age. The change would apply to all pension schemes, with the exception of those in the public sector, that do not link their normal pension age to State Pension age.

Back to top


  4. Proposed changes to auto enrolment

The change

At the beginning of 2018, the Department of Work and Pensions published proposals to change the way auto enrolment works. The government will consult on how to introduce the changes over the next few years with a view to introducing them in the mid-2020s. Reduction of the auto enrolment age will mean employers will have to enrol workers from age 18 instead of age 22.

The impact

The hope is that by saving longer in an auto enrolment scheme, workers will build up bigger pension pots. In addition, auto enrolment for administration will become simpler. Employers however might see an increase in their contribution costs, especially if their workforce is concentrated around younger ages as they’ll have to pay contributions for them if they don't already.

Back to top


  5. Increase in lifetime allowance

The change

The lifetime allowance for the 2018/19 tax year is £1.03m. The lifetime allowance is set to increase in line with the consumer price index on 6 April 2019.

The impact

The lifetime allowance is the maximum benefits that can be built up in a registered pension scheme without being subject to a charge. If the benefits when they’re taken exceed the lifetime allowance, the difference between the two is subject to a charge. If the excess is taken as a lump sum, the charge will be 55%. If it’s taken as income, the charge will be 25%.

Back to top


  6. Tax changes for Scottish rate taxpayers

The change

The new bands and rates for Scottish income taxpayers changed from 6 April 2018. An employee will be classed as a ‘Scottish taxpayer’ by HM Revenue and Customs (HMRC) if their main place of residence is in Scotland. 

The impact

How much tax you pay depends on how much taxable income you earn. The table below shows the new Scottish tax bands and rates. 

Tax band name Rate Income range
Start rate* 19%

£11,850 - £13,850

Basic rate 20% £13,851 - £24,000
Intermediate rate*  21% £24,001 - £43,430
Higher rate 41% £43,431 - £150,000
Additional rate 46% £150,001 - rest of income

*New tax bands introduced for the 2018/19 tax year. 

Have a look at our Pension Matters article on the new bands and rates for Scottish income taxpayers. 

Back to top


  7. Tax changes for Welsh rate taxpayers

The change

From 6 April 2019, if you live in Wales, some of your income tax will be paid to the Welsh government. The rates of income tax will be set by the Welsh government.

The impact

Income tax will continue to be collected by HMRC, but the Welsh government will be able to vary the rate paid by Welsh resident taxpayers. This means that people living in Wales could pay a different rate of income tax compared to people in other parts of the UK. Details of the proposed rates will be announced in the Welsh government’s budget.

Back to top


  8. GDPR changes

The change

On 25 May 2018, the new General Data Protection Regulation (GDPR) came into force. It aims to strengthen data protection for customers, giving them more control over their personal information. 

The impact

Employers had to review the personal information they held on their employees and customers and make sure they had a genuine reason for processing personal information as well as reviewing and updating business materials and processes. We’ve pulled together a handy checklist to help employers take stock and review the actions that should have been taken. 

Back to top

Last updated: 08 Sep 2018

The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London EC3V 0RL.