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Pension Information - About Pension Simplification

 

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.

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