Current Pension Issues

Budget 2007

Pension Term Assurance (PTA)

The Chancellor has confirmed the withdrawal of tax relief on PTA contracts and with certain transitional exceptions, individuals will no longer receive tax relief on pension contributions for new personal pension life assurance policies in both personal and occupational schemes. Under occupational pension schemes tax relief will no longer be available for all contributions made on or after 1 August 2007, unless the insurer received the policy application before 29 March 2007 and the policy was taken out before 1 August 2007. For personal pension schemes, tax relief will no longer be available for contributions made on or after 6 April 2007, unless the insurer received the policy application before 14 December 2006 and the policy set up before 6 April 2007. Tax relief on premiums for policies that continue to qualify will cease if the policy is varied to increase the sum assured or extend the term, unless the variation is because of the exercise of an option within the policy. It is also likely that provisions in the Finance Bill will allow the government to act quickly to remove relief from any products introduced in the future to try to avoid these restrictions.

Alternatively Secured Pensions (ASPs)

As anticipated new minimum and maximum limits for drawing income have been introduced along with new rules on what schemes should do when they cannot trace members at age 75. The new imposition of unauthorized payment status on any payment of a lump sum benefit to another scheme member and imposition of IHT on the ASP fund effectively removes the option of passing pension funds down through the generations.

Lump Sum Death Benefits

The introduction of a two-year time limit on payment of lump sum death benefits from a pension scheme means that payments not made within the deadline will be subject to IHT charges.

April 6th 2006

On this date, the government introduced a radical overhaul of UK pension legislation. Hailed as 'pension simplification' it introduced a single pension regime for all pension benefits replacing the eight which used to apply, meaning that everyone holding or administering a pension at that date had to face the challenge of how to make their pension provision fit the new rules.

Some of the main changes were:

Alteration to the levels of contribution which can be made
The imposition of a new Statutory Lifetime Allowance (SLA) on funds
Removal of restrictions on investment types
One set of investment rules for all schemes
New Protection measures available
Early retirement age to rise in 2010
Increased options for taking income in retirement
Universal calculation basis for Tax Free Cash
Overhaul of death benefit procedure
Changes to AVCs
New requirement for consultation with members by employers or trustees
Changes to disclosure of information to members
Changes to member nominated trustees
New requirement for trustees knowledge and understanding
Changes to options when leaving service
New provision to allow 25% of Protected Rights to be taken as Tax Free Cash
Change to the age at which Protected Rights can be taken
Change to reporting and administration requirements
Embracing/controlling the specific aspects that relate to the simplification regime detailed above

This legislation affected Individuals, Pension Trustees, and Sponsoring Company Administrators. In this respect it is important that very member of a UK pension scheme takes steps to ensure that there were no detrimental effects on their pension following the changes and that wherever possible they take advantage of the positive measures introduced.

From our experience, every pension problem is unique, as is the solution. A look at our pension case studies, provides an insight into the types of pension problems Caledonia Asset Management Ltd has helped clients find their way through.

Could yours be the next problem that we solve? Contact us now to find out.

Disclaimer:

The legislative changes described on this website are contained within Acts passed by Parliament. An Act often contains only an outline of the new laws with full details provided in secondary legislation such as Statutory Instruments.

The information supplied is based on Caledonia Asset Management Ltd's current understanding of the legislative position to date and these details may change.

They will be updated on our website as they become available.

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