On 22 June 2010 the Chancellor gave details of his emergency budget. Click on this link to view a summary of the changes affecting pension schemes.
From a USS point of view the main changes are to the way in which tax relief will in future be restricted and also the use of the Consumer Price Inflation index as the measure of price inflation used to increase state and public sector pension benefits.
Pension increases in USS
The rules of USS currently state that pensions in payment and deferred benefits are increased in accordance with 'Part I of the Increase Act as if those benefits were official pensions.' In plain English this means USS pension benefits increase in line with public sector pensions. It would therefore appear inevitable that USS pension increases in future will be linked to Consumer Price Inflation, rather than Retail Price Inflation. The Trustee Company is however currently seeking advice as to whether this will apply to USS.
Tax relief
During 2009 changes were proposed by HMRC to the way in which ‘high earners’ receive tax relief. The proposals that were to have taken effect from April 2011 were complicated and resulted in potentially high tax charges for those with earnings in excess of £130,000 pa.
The new proposals, if they proceed in their proposed form, will affect a higher number of USS members who might not normally be considered as ‘high earners’. Unfortunately we await further clarification from the Treasury on how this new system will work, following a period of consultation with the industry.
Please read the additional information here on the previous proposals, importantly the ‘anti-forestalling’ measures still apply.
Unfortunately we are currently unable to give members any more detailed information until we receive further clarification from our advisers and the Treasury on these proposals but of course will inform members as soon as we know.