Pensions
- About Pension Simplification
Pension Simplification
The
Government have announced the biggest shake up to the pension system
for over 30 years. The changes are due to come into force on 6th
April 2006. These changes will affect almost everyone in the workplace,
from Pension Scheme managers, shreholding directors, partners and
the self employed, to employees with or without existing peisions.
What
has Changed with Pensions?
Pension
Simplification will replace the eight tax regimes that exist at
present with a single universal regime for tax privileged pension
savings.
Key
Changes:
- Pension
funds will have a lifetime limit, initially set at £1.5
million, increasing over the following five years after Pension
Simplification
- Total
contributions from an individual and employer should not exceed
an annual allowance of £215,000 initially. This will also
increase over the following 5 years after the Pension Simplification
date
- Personal
Annual contribution limit of annual salary. Employer contributions
can be made up to the annual allowance
- Maximum
tax free lump sum will be 25% of the fund at retirement for all
types of pension contracts
- The
minimum age from which benefits can be taken will rise from 50
to 55 by the year 2010
You might require extra advice if:
- You
are approaching retirement - you might be better off taking your
benefits after the changes come into force
- You
have large funds - you may have to protect your benefits prior
to the beginning of Pension Simplification, to comply with the
Government limits and you may want to pay in additional contributions
while you can
- You
have a high proportion of your Tax Free Cash, you need to ensure
that you have the right contract before Pension Simplification
as you might loose the entitlement to Tax Free Cash above 25%
if moved after the Pension Simplification date
- You
are looking to capitalise on the tax advantages of holding residential
property (or other investments) within a pension - you will need
to look at what you can and can't do
- You
are Senior management, you should consider how to reshape your
company's benefits packages
OCIS
provide general financial information, we urge you to consult an
Independent
Financial Adviser ( IFA )
before making any important decisions about your finances. |
