Pensions bridging between retirement and state pension

Finance Bill – in a Public Bill Committee am 12:45 pm ar 30 Mehefin 2016.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Question proposed, That the clause stand part of the Bill.

Photo of David Gauke David Gauke The Financial Secretary to the Treasury

Clause 20 makes changes to help align the tax rules on the payment of bridging pensions for the introduction of the single-tier state pension. As the Committee will know, bridging pensions are paid by some occupational pension schemes for members who start to receive their scheme pensions but are yet to reach state pension age. The purpose is to level the amount of regular income that some members receive from the date they retire. When the individual reaches state pension age, their scheme pension is reduced by approximately the level of the state pension, thereby providing the individual with a level income throughout retirement.

Currently, the maximum amount by which the bridging pension can decrease is calculated by reference to the old state pension applied prior to April 2016. If no change were made to the legislation, any reductions made for members entitled to the new single-tier pension could result in unintended tax consequences for the individual concerned. The changes made by the clause, together with forthcoming regulations, will therefore enable schemes to reduce bridging pensions in an appropriate way when the members concerned become entitled to the single-tier state pension. The clause will allow pension schemes to continue to provide their members with a bridging pension from retirement to state pension age, which will provide individuals with a level income throughout retirement and prevent any unintended tax charges.

Question put and agreed to.

Clause 20 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Mel Stride.)

Adjourned till this day at Two o’clock.