In documents accompanying today's Pre-Budget Report (PBR) the cap for the next tax year is set at £105,600, as we expected. This is based on the September RPI figure (3.1%), the present year's cap (£102,000) and the formula set out in s.590C (5) of the Taxes Act.

Less predictably, perhaps, though logically, the Treasury is also increasing two related limits for the calculation of maximum benefits. Last year we wondered if the Treasury would announce any change to the Glossary definition of final remuneration (FR) in the Practice Notes (IR 12), wherein provisos (iii) and (vi) impose a limit of £100,000. It didn’t, but this year it has: the FR cap is to be increased for 2005/06 to £105,600, ie the same as the earnings cap. Consequently, the maximum tax-fee cash for 87-89 members of 1.5 x FR rises from £150,000 to £158,400 from 6.4.05.

No hint is given of any amendments to the pensions sections of the Finance Act 2004 which might be forthcoming in next year's Finance Act. In his speech, the Chancellor did, however, make a few other announcements relevant to pensions in 2005/06:

1. paid maternity leave will be transferable from mothers to fathers. From April 2007 the maximum period of paid maternity leave will rise from 6 months to 9 months, and ultimately a full year.

2. the current ISA limits will be extended for another five years to 2009.

3. the pension credit will rise in line with average earnings.

4. for those over 70 the Government will add an extra £50 to the Winter Fuel Payment. Pensioners aged over 70 will receive a total of £250 and pensioners aged over 80 will receive a total of £350.