Pensions A-Day


Q. What is A Day?

A. This is the name given to the new pension rules that came in on the 6th April 2006. It is also referred to as Pensions Simplification.


Q. Is it better?

A. For most people, definitely yes. It virtually removed the previous restrictive contribution limitations. It also standardised the rules for all types of pensions e.g. tax free cash sum of 25% of the fund.


Main changes


'Homogenised' Pensions:  Any type of pension can be taken out without conflicting with any existing arrangement you may have. In practice this means that if you are a member of a company scheme and want to top it up you can use a Personal Pension instead of a (more restrictive) AVC or FSAVC.


New Allowances:  Removal of restrictive age based contributions. 100% of earnings up to £50,000 (£40,000 for 2014/15) can be paid into pensions.


More Retirement Options:  Wider choice of annuities.


Removal of 'Normal Retirement Age' :  No need to retire to start drawing benefits. This allows a phased retirement - perhaps working progressively fewer days while taking gradually increased retirement benefits.


Minimum Retirement Age:   Age 55.


More fexible Protected Rights:   These benefits which result from 'contracting out' can now be taken in the same way as ordinary pension benefits ( non-protected rights) i.e. at age 55 (see above) and a choice of 25% tax free cash sum. Also there is no need to buy an inflation linked pension which has a higher cost.


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