| Personal Pensions and Stakeholder Pensions There are plenty of
other people, particularly self-employed individuals but also some employees, who have a
personal or even a stakeholder pension, whose pension operates on a 'Defined Contribution'
basis.
The A-Day revolution
A-day as it became known - April 6th 2006 - introduced the biggest
shake up in Pensions for a century and provided individuals with greater
scope to fund their retirement.
Under this pension simplification process eight different sets of rules
for different types of pension have been replaced with one single set of rules
for all pension plans.
What to do as a result needs good advice, especially for higher earners,
as the wrong decisions could mean being taxed at 55%. The main elements of
the changes are:
Individuals are able to contribute more to their pension each year
(up to 100% of their salary, except for those earning more than £235,000 in year 2008/9, rising to £255,000 in 2010/11/) and get tax relief on it.
There is, however, a Life Time Allowance, initially 1.5 million in
2006/2007 - beyond this amount, the fund will be taxed at 55%. In 2008/9 this amount is £1.65m and will rise to £1.8m in 2010/11.
Many people will now be able to take more of their fund as tax free cash.
The maximum has normally been three times final salary. Now it will be
possible to take 25% of the whole fund. To check on your entitlement ask
your pension administrator.
It is no longer necessary to take an annuity at 75. Instead you can take an ASP (alternatively secured pension).
If you have a SIPP (self-invested personal pension) you can invest in a
greater range of assets. Those with 'trivial pensions' can take the entire
fund as a lump sum.
The minimum age for drawing a pension rises from 50 to 55 from April 6
2010.
Those with occupational pensions no longer have to stop working in
order to draw a pension.
Expert advice is required in looking at your options.
And finally...
As you can see both pre and at retirement planning can be complicated and also needs to
be set against your other financial needs and assets. Because of this, you should seriously consider getting some help from a financial advisor. You can go to an advisor who works for one of the banks or building societies but remember that they will only advise you based on the products that their organisation sells. Or you can go to an Independent Financial Advisor (IFA) who can advise you from the whole range but who will charge you for the advice. In order to help you find a reputable IFA, click on the link below.
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