1. experienceandexpertise Summer Budget 2015 Claire Trott Director, Head of Pensions Technical

2. experienceandexpertise Copyright 2014 Agenda Death benefits Alignment of PIPs Taper of annual allowance for high earners Lifetime allowance and protections

3. experienceandexpertise Copyright 2014 Death benefits

4. experienceandexpertise Copyright 2014 Tax charges on lump sums Pre 75 –Nil if designated within two years –Marginal rate if designated after two years Post 75 –45% for the tax year 2015/16 –Marginal rate thereafter Removal of existing 2 year rule for lump sums –No unauthorised payment charge if paid after 2 years

5. experienceandexpertise Copyright 2014 Drawdown for non-dependents Beneficiaries –Dependant Financial dependent of the member –Nominee Non- dependent, but nominated by the member / administrator –Successor Non-dependent, nominated by the nominee / dependant / successor / administrator Member doesn’t nominate successors

6. experienceandexpertise Copyright 2014 Taxation of beneficiary income Dependent on the age at death of last beneficiary/member Last death pre age 75 –Growth tax free – within usual pension rules –Income tax free – no annual limits Last death post age 75 –Growth tax free – within usual pension rules –Taxed at marginal tax rate of beneficiary

7. experienceandexpertise Copyright 2014 Taxation case study Julie is aged 80 when she dies, she has nominated her younger sister Mary –Mary chooses to use nominees flexi-access drawdown –Mary will pay marginal rate income tax on any income she takes. Mary dies age 71 and she has nominated her son, Geoff to receive her benefits. –Geoff chooses to use successor’s flexi-access drawdown –Geoff can draw income tax free at any point. Geoff dies aged 80 and has nominated his son Simon to receive his death benefits. –Simon chooses to take successor’s flexi-access drawdown –Simon pays marginal rate income tax on any income he takes.

8. experienceandexpertise Copyright 2014 Existing dependant’s drawdown Designated to DD and no income taken –New rules will apply – no tax if pre 75, marginal rate if post 75 fund –No time limit – according to Policy dept –Awaiting confirmation if they can switch from capped to flexi-access dd Designated to DD and income in payment –Old rules will apply – taxed at marginal rate Second death of an existing dependant –New rules will apply –No need to pay out as lump sum

9. experienceandexpertise Copyright 2014 New two year rule Income only tax free if designated within two years – pre 75 –Income can still be taken but not exempt from income tax –No LTA test applies if from un-crystallised funds after 2 years – drafting error? No two year rule for successors flexi-access dd Expression of wishes should be clear and up to date but not binding Binding nominations will mean IHT charges

10. experienceandexpertise Copyright 2014 Lifetime allowance implications New BCE 5C and 5D on death –Test on un-crystallised benefits left to dependants or nominees flexi-access drawdown or annuity –Test against member LTA No test post 75 or crystallised funds Pre death BCEs and over LTA –Leave within fund and only pay 25% LTA charge? –Pass the income down to beneficiaries

11. experienceandexpertise Copyright 2014 Alignment of PIPS

12. experienceandexpertise Copyright 2014 Basics Pension input periods all being aligned to tax year end All PIPs ceased on 8 th July 2015 –Even if it would have run into 2016/17 tax year All PIP restarted on 9 th July 2015 New PIPs will run to 5 th April from now on May have 3 PIPs ending in this tax year

13. experienceandexpertise Copyright 2014 Basics Tax year split into two mini tax years –Pre alignment tax year, 6 th April 2015 – 8 th July 2015 –Post alignment tax year, 9 th July 2015 – 5 th April 206 Pre alignment tax year has AA of £80,000 Post alignment has AA of residual of pre alignment tax year AA –Max £40,000 Carry forward from three previous tax years still available

14. experienceandexpertise Copyright 2014 20142016 AprJulOct2015AprJulOct2016Apr Summer Budget 2015 PIP 2 - £40,000 Post alignment tax yearPre alignment tax year PIP 1 - £40,000 PIP 3 - Nil Maximum already paid

15. experienceandexpertise Copyright 2014 20142016 AprJulOct2015AprJulOct2016Apr Summer Budget 2015 PIP 2 - £20,000 Post alignment tax yearPre alignment tax year PIP 1 - £40,000 PIP 3 – Max of £20,000 Some contributions paid

16. experienceandexpertise Copyright 2014 20152016 AprJunAugOctDec2016Apr Summer Budget 2015 PIP 1- Nil Post alignment tax yearPre alignment tax year PIP 2 - Max of £40,000 Tax year PIP - Nothing paid

17. experienceandexpertise Copyright 2014 20152016 AprJunAugOctDec2016Apr Summer Budget 2015 PIP 1- £40,000 Post alignment tax yearPre alignment tax year PIP 2 - Max of £40,000 Tax year PIP – Maximum Paid

18. experienceandexpertise Copyright 2014 Taper of Annual allowance

19. experienceandexpertise Copyright 2014 Basics Reduction of £1 of AA for each £2 earned over Adjusted Income –Currently £150,000 AA Reduced to a minimum of £10,000 No need to test Adjusted Income if earning less than Threshold income –Currently £110,000 Anti avoidance measures in place –Salary sacrifice added back in –Flexible earnings looked reviewed

20. experienceandexpertise Copyright 2014 Adjusted income ‘Net pay’ –which is total taxable income (chargeable to income tax) reduced by reliefs such as trading and share loss relief Plus reliefs claimed under net pay arrangements and excess claims also made in relation to net pay arrangements Plus personal contributions made under net pay arrangements. Plus contributions to overseas schemes, if non dom and receiving tax relief Plus employer pension contributions Less payments received from lump sum death benefits.

21. experienceandexpertise Copyright 2014 Threshold income ‘Net pay’ –which is total taxable income (chargeable to income tax) reduced by reliefs such as trading and share loss relief Less payments received from lump sum death benefits. Salary sacrifice arrangements need to be added in if started or increased on or after 9 th July –Includes those that have annual opt in Ignore flexible income adjustments

22. experienceandexpertise Copyright 2014 Money purchase annual allowance Can’t reduce AA below £10,000 The reduction only applies to the alternative AA of £30,000 that can be used against DB benefits The alternative AA can be reduced to nil for those with adjusted income over £210,000

23. experienceandexpertise Copyright 2014 LTA Protections

24. experienceandexpertise Copyright 2014 Individual protection 2014 Protect between £1.25m and £1.5m Applications available until 5 th April 2017 Valuations needed at 5 th April 2014 –Don’t leave it too late Backdated valuations can be hard to get Individual lifetime allowance granted

25. experienceandexpertise Copyright 2014 Fixed protection 2016 Details still to be finalised – application online, no certificate –Legislation in Finance Bill 2016 Protect LTA of £1.25m No further contributions No relevant benefit accrual Can be lost – be careful of compensation payments

26. experienceandexpertise Copyright 2014 Individual protection 2016 Still awaiting finalised details – application online, no certificate –Legislation in Finance Act 2016 Protect between £1m and £1.25m –Value at 5 th April 2016 Individual lifetime allowance granted

27. experienceandexpertise Copyright 2014 Any other issues?

28. experienceandexpertise Copyright 2014 Talbot and Muir Limited provides administration to Self Administered Pension Schemes Talbot and Muir SIPP LLP provides administration to Self Invested Personal Pensions. T M Trustees Ltd provides independent trustee service. Whilst we provide technical information, we are not authorised to provide any form of financial or investment advice. We try to ensure that the information provided is correct, but we do not give any express or implied warranty as to its accuracy. The information contained in this presentation does not constitute financial or other professional advice and is based on our interpretation of the relevant HMRC guidelines, which are subject to change. We do not accept any liability for error or omission. Talbot & Muir is the trading name for Talbot and Muir Limited (company number 02869547). T M Trustees Ltd (a limited company registered in England and Wales under company number 03094287) whose registered office is situated at 22-26 Clarendon Street, Nottingham NG1 5HQ Talbot and Muir SIPP LLP (company number OC306490), is registered in England, registered address 22 Clarendon Street, Nottingham, NG1 5HQ and is authorised and regulated by the Financial Conduct Authority Talbot and Muir