Despite much speculation about potential major changes to pensions taxation, the March 2016 budget was relatively uneventful from a pensions perspective. The following bullet points highlight the key pension changes announced by the Chancellor;

Lifetime ISA

From April 2017, those over 18 and under 40 will be able to open a new Lifetime ISA. This will allow up to £4,000 of savings each year to which the Government will add a 25% bonus. Contributions will be made with the individual’s own cash. This additional bonus will be payable up to a maximum of £1,000 for each year between the ages of 18 and 50. The money in a Lifetime ISA can be used to:

• supplement retirement income from age 60, unlike a pension where it is age 55, or
• accessed before then to help first time buyers buy a home worth up to £450,000 at any time from 12 months after opening the account.

Individuals will be able to withdraw money before age 60 for other purposes however the Government’s element of the fund, including any interest or growth on the bonus will be returned to the Government. In addition there will be a 5% charge.

The maximum that can be paid into a Lifetime ISA will therefore be £128,000 with a maximum bonus of £32,000

Annual allowance

There were no changes announced to the annual allowance (the limit on the total amount of contributions that can be paid to a defined contribution pension scheme and the total amount of benefits that you can build up in a defined benefit pension scheme each year, for tax relief purposes). This will remain at £40,000 for the tax year 2016/17 with the introduction of the tapered annual allowance from 6 April 2016 for higher earners. The money purchase annual allowance also remains at £10,000.

Lifetime allowance

As expected, the budget announcement confirmed that the lifetime allowance (the limit on the amount of pension benefit that can be drawn from pension schemes without triggering an extra tax charge). The lifetime allowance was introduced in 2006 at a level of £1.5 million and reduced from £1.25 million to £1 million from 6 April 2016.

Pension dashboard

The Government confirmed its plans for a pensions industry designed and funded pensions dashboard to be in place by 2019 so an individual can view all their retirement savings in one place.