Pensions Simplification
Pensions Simplification
Pensions Simplification
'A' Day (Appointed day) arrived on 6th April 2006 and brought with it sweeping and radical changes for all pension plans - whether occupational or personal.
From this date there will be just one set of tax rules for all types of pension, with an individual Lifetime Allowance (£1.75 million - 2009/2010) and an individual Annual Allowance (£245,000 - 2009/2010). These limits will increase each year (please ask for the specific yearly limits). All individuals will be able to fund up to these new attractive limits. Schemes already in existence before this date will need to update their rules to allow some of the new flexibilities.
Exceeding the limits will simply trigger a tax charge.
The 'A' Day rules made the majority of pensions much simpler and there could be a number of key advantages
- Pensions are much easier to understand.
- Most customers now have greater flexibility in the size and timing of their contributions.
There will also be a number of other changes including:-
- Early retirement age will rise from age 50, to age 55 by the year 2010
- Full concurrency (i.e. being able to pay into any array of plans you wish), subject to the annual allowance
- Wide investment flexibility
- Up to 25% Tax Free Cash will be available from the majority of pension schemes.
- The ability to commute a 'small' fund (the triviality rule) as a one off lump sum as opposed to having to draw a regular income if the value of your pension rights is below a certain level.
This option is only possible where the total of all your pension rights does not exceed 1% of the Lifetime Allowance. For the tax year 2009/10, this will equates to £17,500.
There are different ways of valuing existing pension rights to test against this threshold please contact us for futher information.
- Flexible options at retirement when deciding to take benefits
- No need to 'have to' secure benefits at age 75 via an annuity
Why not contact BrookMill to review your retirement planning?