Pensions

Background.

From the 6th April 2006 new rules were implemented by the government under the title Simplification. This new legislation largely replaced much of the previous pension regulations. The main points under Simplification are:

Lifetime Allowance

For this present tax year – 2011/12 the maximum permitted tax exempt fund at retirement is £1.8 million.  From 6th April 2012 this will be reduced to £1.5 million although one can preserve the old arrangements.

Contributions and Annual allowance

The figure for this year (2011/2012)has been reduced from £255,000 to £50,000.  Anyone can contribute up to 100% of their earned income subject to the annual allowance or £3,600 if they have no earned income and receive tax relief. Eligible members of registered pension schemes may carry forward unused annual allowance of up to £50,000 a year for 3 years from 2008/09

Pension Commencement Lump Sum (tax free cash)

A maximum of 25% of the value of the pension fund can be taken tax free. (some transitional protection can be applied for if built up prior to 2006.)

Retirement age

Since 6th April 2010 the minimum retirement age is 55 .

Death Benefits

The maximum is equal to the lifetime allowance which presently is £1.8 million 

Drawing your pension

You can do this in one of 4 ways:

• Scheme pension - this is drawing from an employer’s occupational scheme.
• Lifetime Annuity - basically this is exchanging your pension fund for an income.
• Unsecured pension - this is income drawdown.
• Alternatively secured pension - This is available from age 75.

Click on a link above for information on each of these options.

These are the main headlines of Simplification. There is much “small print” which may affect different people in different ways. Contact us for advice.