Autumn Statement 2015: what it means for pensioners

There was mixed news for pensioners in the Autumn Statement. On one hand, George Osborne reiterated his commitment to the triple lock that will protect pensioner incomes, and announced another uplift in the State Pension to £119.30 a week. However, in among the rest of the announcements were some nasty blows for the recently retired - and those set to retire shortly.

Pensioners
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First the good news. The increase in the state pension by £3.35 to £119.30 was hailed as the biggest rise in 15 years, and Osborne claimed it would leave pensioners £1,125 a year better off - which is going to come in handy.

Kate Smith, Regulatory Strategy Manager at Aegon said: "The Chancellor has been keen to protect the benefits of pensioners and he continued to give generously with the Autumn Statement."

Unfortunately, it's not all good news. If you fancy travelling and escaping the cooler weather, Osborne warned that anyone leaving the country for more than a month would lose their pension credit and housing benefit. This is a cut from 13 weeks - which at least allowed people to be somewhere less challenging in the depths of winter.

Set to retire

For those on the cusp of retirement there was bad news too - particularly for anyone with plans to invest in a buy-to-let property, in order to generate a retirement income. In addition to the end of tax relief on mortgage interest (which Osborne announced in the Budget), he has hiked stamp duty for investors. Anyone wanting to invest in a buy-to-let property or a second home must pay a stamp duty rate that's 3% higher than for those who plan to live in the property.

As Mark Posniak, Managing Director at Dragonfly Property Finance, says: "The stamp duty announcement is a major body blow to anyone who considers bricks and mortar to be a much safer bet for their retirement income than stockmarkets."

For those set to retire after April 6 next year, the new flat rate state pension was announced at £155.65 a week. Osborne pointed out that it's more than lower earners currently get on means tested benefits. However, as Smith points out: "A large percentage of people retiring from April will not receive the full £155.65 due to a lengthy transition to the new system."

Anyone planning to save though an ISA was dealt a blow too - as the ISA allowance for 2016/17 was frozen. Gareth Shaw, head of consumer affairs at Saga Investment Services, said: "ISAs are an integral part of the retirement planning process – indeed more than 12 million over 50s now hold an ISA, and the significant savings they've have built up can help them generate a retirement income tax efficiently. The ISA allowance has become a lot more generous, but the freeze will disappoint all those using these popular accounts to fund their retirement."

Act fast!

But for many people, the key was not what Osborne announced about pensions, but what he didn't mention - notably regarding pension tax relief for higher earners.

This was widely predicted to be cut in some way, as its one of the lowest-hanging-fruit available to a Chancellor looking for cuts. Osborne had already hinted that he would save any changes until after a full consultation on pension taxation concludes - which is likely to mean the Budget next spring. However, commentators were expecting some sort of interim announcement to stop higher rate taxpayers exploiting the window of opportunity before the Budget

Nigel Green, deVere Group CEO and founder says: "It had been forecast that to avoid a rush of money into pensions from Britain's top earners, understandably keen to take advantage of the higher tax relief, Mr Osborne could set out immediate steps to stop this from happening in the Autumn Statement. This didn't happen.

"However, let's be clear: this tax raid is indeed more likely than not to take place in the near future. It can be reasonably expected that the Annual Allowance will be slashed from £40,000 to £10,000 for many higher earners and there will be hefty tax charges for anyone who goes over the threshold.

"As such, those seeking to make larger one-off pension contributions to make the most of their retirement savings might be wise to consider doing so sooner rather than later whilst they have this extended window of opportunity."