Pensions simplification
On the 6th April 2006 major changes were introduced to the structure of UK Pension schemes. The new simplified regime is largely a replacement of past pension rules as opposed to adding another layer of legislation. Many changes were introduced, some of the main ones are as follows:-
Introduction of a Lifetime allowance
Each member of a pension scheme has a maximum permitted tax-exempt fund at retirement. Initially this lifetime allowance is £1.75 million per person (2009/2010 tax year), but will rise year by year to £1.8million in (2010/2011 tax year)
Contributions & The Annual Allowance
An individual can now contribute up to 100% of their earnings or £3,600 whichever is the greater. There is now an annual allowance limited to £245,000 (for the 2009/2010 tax year), but rising to £255,000 by 2010/2011 tax year, for all pension schemes. Tax relief is given on this annual allowance.
Pension Commencement Lump Sum (Tax Free Cash)
The maximum Tax Free Cash from any pension arrangement is normally 25% of the value of the pension rights, although in some circumstances a higher amount may be taken.
Retirement Age
The concept of a normal retirement age is less definite than it was in the past. Members of pension schemes can choose (within certain age ranges) when to take their benefits, making the process of retiring more flexible. The minimum age for drawing benefits will rise from 50 to 55 years with effect from 6th April 2010, (subject to some transitional rules)
Death Benefits
The maximum lump sum death benefit is equal to the lifetime allowance so initially this will be £1.75 million (2009-10).
