‘A’ Day (the Appointed day) arrived on 6th April 2006 and brought with it sweeping and radical changes in relation to pension legislation. This has created a single universal regime to replace the previous eight tax regimes and the changes have affected savers in occupational and personal pension schemes, employers and financial advisers.

Pension simplification introduced two new controls, the pension Lifetime Allowance (LA) and pension Annual Allowance (AA), replacing all eight previous tax regimes with their numerous complex rules.

From April 2006, there is now just one set of tax rules for all types of pension, with an individual LA of £1.5 million (2013/2014) and an individual AA of £50,000 (2013/2014).  These levels fall to £1.25 million and £40,000 per annum from April 2014, respectively.   All individuals will be able to fund up to these limits with the possibility to also carrying forward unused AA from the previous 3 years of up to £50,000 per annum.

Exceeding the LA or the AA will simply trigger a tax charge.

Other changes included:

  • Early retirement age available from age 55
  • Full concurrency (i.e. being able to pay into any array of plans you wish), subject to the annual allowance and potential for carry forward
  • Wide investment flexibility
  • Up to 25% Tax Free Cash
  • The ability to commute ‘small’ funds of less than £18,000, as a one off lump sum as opposed to having to draw a regular income from age 60
  • Flexible options at retirement when deciding to take benefits such as capped and flexible drawdown
  • No need to ‘have to’ secure benefits at age 75 via an annuity

Why not contact us to review your retirement planning?