As David Gauke, the work and pensions secretary, announced changes to state pensions, the news that people born between 1970 and 1978 will have to wait longer to claim their pension spread widely and quickly.
The changes also impact those with pension entitlement in addition to the State scheme, including those who have been auto enrolled as the minimum age at which benefits can be taken from these scheme.
Amid all the bad news, what was overlooked according to Stephen Baxter, Joint Managing Director of Robertson Baxter, was the ”˜step in the right direction’ for pensions Life Time Allowances (LTAs) that was announced on the same day.Â
“When former Chancellor, George Osborne, announced in 2015 that the LTA would reduce to Â£1m from Â£1.25m with effect from 6 April 2016, he also announced that the allowance would increase in line with Consumer Price Index (CPI) from April 2018. This has now been confirmed by the Treasury,” said Stephen Baxter.Â
“If this follows the method used for most CPI increases, it is the figure in September in the previous year that will determine the level of increase – September 2017’s figure will determine the increase from April 2018.
“As with most things, the bad news hits the headlines, but the good news went well under the radar,” added Stephen, whose firm manages the financial future of very high net worth individuals, trustees and charities across the region.
“This means that, at the current rate of CPI 3%, LTAs that were Â£1m are now Â£1,030,000.
“Whilst this is a step in the right direction, it will be a while before the historical reductions are recouped. If inflation stayed at the Government’s target of 2%, it would not be until April 2029 that the LTA would exceed the previous level of Â£1.25m.