Working with your people to save for their future
Helping you help your people
While we do not offer an advisory service, we have the technology to help make sure your payroll team are legally compliant. But we can help you do so much more than the legal minimum; by offering other financial wellbeing options to your employees, you can reduce the stresses associated with preparing for later life.
OneHub | Enroller
Enroller is Benefex's very own auto-enrolment software. It covers everything from assessment and communication to auto-enrolling workers and managing opt-outs - plus ongoing management of the scheme.
Our module enables employees to model their annual allowance based on the current tapering rules. It also helps your people to see how they're building upon the allowances they're bringing forward from previous years.
Changes to Pensions Annual Allowance rules, effective 6th April 2020
In the Budget statement on 11th March 2020, Chancellor Rishi Sunak announced that the tapered annual allowance threshold will increase from £150,000 to £240,000 in adjusted income (i.e. total annual taxable income including ALL pension contributions).
The Treasury has published the following:
2.183 Tapered annual allowance for pensions – The pensions annual allowance is the maximum amount of tax-relieved pension savings that can be accrued in a year. For those on the highest incomes, the annual allowance tapers down from £40,000. HM Treasury has reviewed the tapered annual allowance and its impact on the NHS, as well as on public service delivery more widely.
2.184 To support the delivery of public services, particularly in the NHS, the two tapered annual allowance thresholds will each be raised by £90,000. This means that from 2020-21 the “threshold income” will be £200,000, so individuals with income below this level will not be affected by the tapered annual allowance, and the annual allowance will only begin to taper down for individuals who also have an “adjusted income” above £240,000.
2.185 For those on the very highest incomes, the minimum level to which the annual allowance can taper down will reduce from £10,000 to £4,000 from April 2020. This reduction will only affect individuals with total income (including pension accrual) over £300,000. Proposals to offer greater pay in lieu of pensions for senior clinicians in the NHS pension scheme will not be taken forward.
Essentially, this means that many higher earners who were previously unable to add to their pension contributions without penalties, will now be able to contribute more into their pension before incurring an annual allowance tax charge.
It means that the those earning over £150,000 will see the below changes to their Annual Allowance.
- Those in green are no longer affected by tapering and can contribute more in 2020/21 than in the current 2019/20 tax year.
- Those in blue will have an increased allowance greater than the current 2019/20 tax year
- Those in grey retain a £10k annual allowance.
- Those in purple will have a lower than £10k annual allowance.
So, for earners of over £300,000 in adjusted income then the tapered level gradually reduces down from £10,000 (the previous level) to £4,000 when adjusted income reaches £312,000.
Note – the above figures detailed do not account for any carry forward relief that may still be available from the preceding 3 tax years.
Other pensions announcements for 2020-21:
Alongside the changes to the tapering treatment, other key highlights from the most recent budget that impact pensions included:
- Confirmation that the standard annual allowance remains at £40,000 and that the money purchase annual allowance (MPAA) will remain at £4,000
- An announcement that the lifetime allowance, the maximum amount someone can accrue in a registered pension scheme in a tax-efficient manner over their lifetime, will increase in line with CPI for 2020-21, rising to £1,073,100
- The state pension is increasing by 3.9%:
- Full Single Tier State Pension - £168.60 pw will increase to £175.20 pw
- Basic State Pension - £129.20 pw will increase to £134.25 pw
- Confirmation that the Lower Earnings Limit for Auto-enrolment is rising in line with National Insurance to £6,240 pa. The Upper Earnings Limit and Auto-enrolment Earnings Threshold remain static at £50,000 pa and £10,000 pa respectively.
Marketplace has multiple options and providers for you to select from when thinking about rolling out a pension benefit. Download our guide to Marketplace to find out more: