On 15 May the Pensions Bill 2013 finally became the Pensions Act 2014 after more than a year working its way through parliament. It is a major piece of legislation, which will ultimately create widespread change to the pension landscape. The main areas the Act covers are:
- Single tier pension The Act legislates for the introduction of the new single tier state pension from April 2016. The Department for Work and Pensions (DWP) says that this is worth £148.40 a week in 2014/15 terms, although transitional rules mean that few people will initially receive this amount.
- State pension age The Act increases the state pension age (SPA) to 67 by April 2028. It also provides the framework for regular reviews of the SPA based on changes to life expectancy.
- Bereavement support payments From 2016/17, the complex existing bereavement payments system will be replaced by a single lump sum, plus tax-free monthly payments lasting for one year only. The widowed parent’s allowance, payable until a child ceases to be eligible for child benefit and currently worth £111.20 a week, will disappear for new claimants, bringing a long term reduction in government expenditure.
- Private pensions The Act introduces a range of changes to private pensions, many of which will not take effect immediately. These include provisions to allow for automatic transfer of small pension pots, a ban on refunds of pension contributions to short term employees, and powers to cap charges for certain pension schemes.
The Pensions Act 2014, together with forthcoming reforms to how retirement benefits can be drawn, mark a generational overhaul in pension rules. Whatever retirement plans you have, they will almost certainly need to be reviewed.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. The value of tax reliefs depends on your individual circumstances. Tax laws can change.