Retirement Planning - Simplifying Pensions

The following may answer some of the questions you have regarding pensions.

Lifetime Allowance

The lifetime allowance (the total amount an individual is allowed to have in all pension arrangements without tax implications) will initially be £1.5 million, rising each year until it's £1 .8 million in 2010/2011.

Tax-free Cash

The maximum amount of tax-free cash that an individual can take from all types of pension arrangement will normally be 25% of the pension fund value (as long as this is not more than 25% of the standard lifetime allowance). A special formula will be used to calculate the tax free cash for defined benefit pensions.

Contributions

Contributions of up to £3,600 or 100% of pensionable earnings (whichever is higher) will be allowed each year, subject to an overall allowance of £215,000 each year. This allowance applies to all contributions paid by or for an individual and will increase each year, rising to £255 000 in 2010.

Contributions exceeding this limit will be taxed at 40%, although any member contributions made above the limit may be refunded on request.

Income Drawdown

The 'basis amount' is based on a single life level pension purchased using set rates. Under the new rules, the minimum is 0% and the maximum is 120%. Once calculated, income limits are set for five years.

Alternatively Secured Pension

From the age of 75, individuals will have the option of using their pension fund to take an 'alternatively secured pension’ instead of having to buy an annuity.

Other Changes

There are new rules for self-investment and there are transitional arrangements to protect investments taken out before 6 April 2006 .

Why not contact us to find out how we can help secure a better future for you and your family.

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