Stakeholder Pensions
What is A Day?
In the Finance Act 2004, the government announced the most radical overhaul of the pensions regime since the late 1980’s.
The Act introduced a completely new Tax regime covering virtually all approved pension arrangements.
This guide will give a basic overview of the main provisions. However, such a radical overhaul will require a new, and detailed, approach to retirement planning.
Our Advice must be, if you have any questions about this important area, you should contact us. We will be happy to guide you.
How much may I contribute?
There will be an annual allowance of £3 600, or 100% of earnings. This latter limit is initially capped at £215 000 and will rise to £255 000 by 2010/11.
There will be an overall “lifetime allowance” on the total amount of money you can save in your pension and still benefit from tax relief. This total fund size is set at £1.5 million for tax year 2006/07 rising to £1.8 million by 2010/11.
These figures include the capitalised (Cash equivalent) figure of all your pension arrangements. Funds over this figure may be subject to Tax charges.
If you feel that these limits could affect you, it is important to get advice. Please contact us, we will be happy to help.
What about my Tax Free Cash?
This will be restricted to 25% for all pension arrangements.
Again, if you feel that this could be a restriction, please contact us, as we may be able to help you.
Do I get Tax Relief on my Pension Contributions
Yes, this will not change, as long as the contribution is within the limits set out above.
Can my employer make contributions on my behalf?
Yes, but this will be included in the limits given above.
Can I retire early?
The minimum age of retirement initially is 50, but this will rise to 55 from April 2010.
How will Divorce affect my pension?
Sadly, this is an important question for many people. There are new rules in effect after 6th April 2006, and it is important to understand how you may be affected.
Please feel free to contact us. We will be happy to advise you.
How can I take benefits?
In many ways the options available seem similar to those already available, but there are some significant changes in the detail.
We strongly suggest that you obtain advice prior to deciding how you will take your benefits. Please contact us, we will be happy to explain your options.
What if I die before I retire?
The maximum lump sum will be the current lifetime allowance. Sums in excess of this will be subject to a 55% tax charge. This is a change from the current regime, and if you think you may be affected, we suggest you contact us for advice.
What areas can I invest in?
Until very recently we believed that the range of investments available would be very wide, and may include Residential Property both in the UK and abroad.
The Government then announced changes to this proposal, which served to restrict the areas of investment to a significant degree.
Again, we would be happy to advise on this important area.
I have significant pension savings in place already. How will I be affected by the new limits?
There are transitional allowances in place that will give degrees of protection.
The form of protection most suitable for you will vary according to both current circumstances, and future plans.
Again, we recommend that you contact us for advice on this important area.
