Pension Simplification – “A Day” – Are You Prepared?6th April 2006 (A-Day) will see the most far reaching and fundamental changes to UK pension legislation ever.
Following the recent trend with new/amended legislation, we are close to 6 months from implementation and unbelievably the final pieces of interpretation/legislation have still to be put on the statute book/published. Notwithstanding this, we are now aware of most of the changes that are to be introduced on 6th April 2006.
All clients should think seriously about their pension entitlements, large or small, if only to ensure from a peace of mind perspective that they have not inadvertently fallen into a trap or missed an opportunity that could have been taken advantage of if action had been taken prior to 6th April 2006.
From April 2006 there are a number of enhanced/new features that will be introduced: -
On the plus side there are
- Significantly higher allowances for pension contributions with full tax relief.
- Full tax relief on premiums for relevant life assurance policies.
- Extension of permitted investments to include residential property, works of art, unquoted limited company shares etc.
- Far greater flexibility at retirement with the option of not having to purchase an annuity.
However on the minus side
- The introduction of a maximum “Life time allowance”.
- Retirement age will become 55 yrs by 2010.
- The ability to borrow may be significantly reduced compared with current rules.
What Action To Take Now?Whilst as stated above, all persons should review their pension (retirement) planning in advance of the 6th April 2006 A-Day, we have identified that the following categories of client are perhaps more likely to be affected than others.
- Those at, or near, retirement.
- Those with total pension funds over £800,000 and /or final salary pension entitlements of over £40,000 per annum.
- Those with Small Self Administered Schemes (SSAS) or Executive Pension Plans (EPP).
- Those with Occupational Pension Scheme benefits from previous employment, or those who have transferred from such schemes to Section 32 policies.
- Those wishing to acquire commercial property for investment or own occupation.
- Those wishing to refurbish or improve existing commercial property.
- Those with Retirement Annuity Contracts.
- Those over the age of 45 who have no existing pension benefits.
If you or your friends and family fall into any of the above categories, we would recommend that you take action now to review your options.
Nunn Hayward AdviceFor clients, we are of course happy to advise anyone who has concerns as to the planning issues/opportunities that present themselves in their own circumstances and in the first instance you should contact your usual engagement partner or Steve Cook, Tax Partner to take matters forward.
Stop PressNunn Hayward is planning a seminar to inform and help clients and business associates to take appropriate steps on this issue in the late autumn. We will announce exact details as to timing and content nearer the seminar date.
