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New Pension Rules A-Day 6 April 2006
- Contributions: The ceiling of how much of your annual salary you can put into your pension will equal total annual income up to £215,000
- Investment freedom: You will be able to invest in a wider range of investments, including residential property, fine wines and works of art
- Tax-free pension pot: There will be a tax-free limit of £1.5m, rising with inflation. Anything above that will be taxed at either 25% or 55%. Existing benefits can be protected. Those in final-salary schemes will be deemed to have a pot worth 20 times their annual pension - up to £75,000.
- Tax-free cash: The maximum tax-free cash sum will be 25% of your total fund at retirement for all types of pension – up to a ceiling based on 25% of your lifetime allowance. If you are entitled to more than this under the current system, you will be able to protect your existing benefits.
- Annuities: No longer compulsory at age 75, if you use an "alternatively secured pension"
- Death benefits: The maximum death benefit will be equal to the lifetime allowance compared with four times salary under the current rules
- Commercial property: From A-Day you will only be able 50% of the value of the fund compared with 75% now in a self-invested personal pension
- Modest pensions: From A-Day it will be possible for people whose pension funds are worth less than £15,000 to take the entire amount as a lump sum. Only 25% of the sum is tax free.
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