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Pensions A-Day: 10 Key Facts You Need to Know
London, 17 March/GNN/ --
HM REVENUE AND CUSTOMS News Release (Ref:NAT 20/06) issued by The Government
News Network on 17 March 2006
On 6 April (A-Day), new simplified rules come into effect around how pensions
are taxed, offering simpler and more flexible retirement arrangements. This
is what you need to know:
1. The many existing sets of rules governing the taxation of pensions will
be replaced with a single, universal regime.
2. For the first time, everyone will be able to save in more than one pension
scheme at the same time.
3. There is no limit on the amount of money you can save in a pension scheme
or the number of pension schemes you can save in - although there are some
limits on the amount of tax relief you can get.
4. You will get tax relief on contributions up to 100% of your annual earnings
(up to an annual allowance set at £215,000). So if you put £100 into your
pension scheme, the tax relief the Government gives you on that is worth at
least £28.
5. Even if you are not a taxpayer you can still get tax relief on pension
contributions. You can put in up to £2,808 in any one tax year and the
Government will top this up with another £792 - giving you total pension
savings with tax relief of £3,600 per year.
6. A-Day will introduce flexible retirement, allowing people in occupational
pension schemes to continue working while drawing their pension, where the
scheme rules allow it.
7. If your scheme rules allow, you can take up to 25% of your pension fund
as a tax free lump sum.
8. If your pension pot is more than the "Lifetime Allowance" when you come to
take your pension you may be subject to a tax charge at that time. But this
will only apply if your total pension savings are in excess of £1.5million
from 6 April 2006 (rising to £1.8m by 2010/11 and reviewed thereafter).
9. Those individuals with larger pensions pots at A-Day will be able to protect
their funds from the Lifetime Allowance Charge by completing and submitting
the appropriate form to HMRC. They have three years from A-Day to do this.
10. The rules on when you can take your pension will change. From 6 April
2010 you will not be able to take a pension before you are 55. There are
a couple of exceptions: you will still be able to retire early due to poor
health, and if you have the right to retire before 50 at 6 April 2006,
that right may be protected.
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