The Local Government Pension Scheme 2014 Simple overview of changes.
Pension Key Changes Jan 2011
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Key Pension changes and planning opportunities Swindells Financial Planning Uckfield Chamber of Commerce 26 th January 2011
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Key changes to pensions legislation in the UK and opportunities for investors.
Transcript of Pension Key Changes Jan 2011
Key Pension changes and planning opportunities
Swindells Financial Planning
Uckfield Chamber of Commerce
26th January 2011
Headlines New Year means……new pension rules
No requirement to purchase an annuity at any age
Tax-Free cash of 25% of pension fund can be taken in whole or part at any age after reaching 55
Annuity v Income Drawdown
Annuity One-off, irreversible
decision to purchase an income for life
Guaranteed and secure
No investment risk
Death benefits selected at outset
Income Drawdown Pension fund remains
invested
Flexible income stream linked to pension fund value
Rising or declining income
Variety of death benefits
Death Benefits
Annuity No lump sum to
beneficiaries
Any spouse/widows benefit agreed at outset
5 or 10 year guarantees
Level, Index-Linked, fixed increases etc…
Income Drawdown Lump sum option – 55%
“recovery charge” (35%)
Full fund for widows annuity
Maintenance of income drawdown for spouse
Tax free lump sum to Charity
Income Drawdowntwo new options
“Capped drawdown” – Draw an income between zero and broadly that which an annuity would pay, reviewable every 3 years pre 75, every year post 75
“Flexible drawdown” – Draw as much as you wish from your pension fund, subject to Income Tax, so long as Minimum Income Requirement (MIR) met
MIR - £20,000 per annum (Gross), to include;o State Pensiono Final Salary Pensionso Lifetime Annuities
Pension contributions
Annual funding allowance of £50,000 (incl. tax relief) wef 6th April 2011
Applies to Employer and Employee contributions
Tax relief available at individuals highest marginal rate i.e. up to 50%
No tax relief over £50K………………..tax charge instead!!
New carry forward rules allowing funding of unused allowances for up to three previous tax years
Planning Opportunities1. Maximise pension funding and carry forward rules……assuming
higher rate tax relief available
2. Consider commencing Income Drawdown pre 6th April if maximum possible income required (120% GAD)
3. Review date pre 6th April 2011 - ensure review to crystallise 120% option for further 5 years
4. Mix annuity purchase and income drawdown, if necessary (MIR), to allow “flexible drawdown”
5. Use “flexible drawdown” for lifestyle planning, gifting and residual pot to heirs
6. Phased drawdown – minimise tax, maximise death benefits
7. Review existing plans to ensure all of the above is possible!!
