Friday, September 21, 2018

Credence Independent Advisors: A look in to the pension

Credit: A look in to the pension changes
A look in to the pension changes

After the end of the budget consultation on 11th June, the Treasury issued its response on the 21st July on pension shake-up, explaining pension changes, which offer a greater deal of freedom for both

September 3, 2014 - These pension changes are generally all positive and the biggest for more than 100 years. Some of the changes are discussed here.

In order to ensure that all defined contribution schemes are able to offer greater flexibility to their members a permissive statutory override shall be introduced. The benefit of permissive statutory override is that it allows schemes to ignore their scheme rules and follow the tax rules instead; in order to make payments flexibly or to provide a drawdown facility.

According to the government mandating these schemes provide flexible payments, which would be disproportionate. Even though some schemes would like to offer flexibility to their members but due to the legal and administrative costs involved, they would prefer not to amend their schemes. The government under these situations would prefer that the schemes were in a position to provide flexibility without amending their rules.

On the other hand, if the schemes do not offer flexible access, the individuals would be able to transfer between defined contributions schemes up to the point of retirement.

It is also expected that the government would make various changes to the tax laws, in order to allow more freedom to providers to create new and innovative products, which meet the needs of the consumers more closely. These include; allowing lump sums to be taken from lifetime annuities, allowing payments from guaranteed annuities to beneficiaries as a lump sum, where they are under £30,000, removing the 10-year guarantee period for guaranteed annuities and decreasing lifetime annuities.

The real intention behind the new tax rules is to provide people with a greater access to their retirement savings. However, they also ensure that individuals do not use these new flexibilities to avoid tax on their current earnings by diverting their salary into their pension with tax relief and then immediately withdrawing 25 percent tax-free.

Those who choose to draw down more than their tax-free lump sum from a defined contribution pension will be able to benefit from further tax-relieved pension saving, and make further tax-free contributions to a defined contribution pension of up to £10,000 a year.

Under the current rules, those who are currently in ‘flexible drawdown’ are not able to make further pension contributions, having an annual allowance of £0. However, from April 2015 they will be subject to a new annual allowance limit of £10,000. This would allow individuals accessing a defined contribution pension worth more than £10,000 to contribute up to £10,000 a year with tax relief to a defined contribution pension, after their first flexible withdrawal.

Without being subject to a £10,000 annual allowance on subsequent contribution, individuals can make withdrawals from three small pension pots and unlimited small occupational pots worth less than £10,000.

Other proposed changes under the new tax rules include the increasing of minimum age at which people can access their private pension from 55 to 57 in 2028 for all pension schemes. However, this change will not be applicable to those in the public sector; which includes police, armed services and firefighters.

According to the government, when the new system is established in 2015; the 55 percent tax charge on pension savings in a drawdown account at death will be too high. As a result, in this year’s autumn statement; the government has intentions to announce the changes.

The government will introduce two new safeguards to protect individuals and pension schemes, but will continue allowing transfers from private sector defined benefit to defined contribution schemes, apart from pensions that are already in payment.

Prior to accepting a transfer; an individual would be required to take advice from a professional advisor, authorized by FCA and independent from the defined benefit scheme.

Currently, if the interests of the members of the pension fund trustee or the scheme are prejudiced by making the payments within the usual period, than they can ask the regulators for a longer time to make transfer payments. However, now there will be new rules for delaying the transfer payments for trustees and the scheme funding levels when deciding on transfer levels will also be taken in to consideration.

For those defined members who wish to access their savings flexible, the government has intentions to consult on removing the requirement to transfer first to defined contribution schemes.

Since, there is no money involved in transfers from unfunded public service defined benefit schemes; therefore, the government intends to consult on removing it. However, transfers from funded defined benefit to defined contribution schemes will be allowed, and safeguards similar to those in the private sector will be introduced where appropriate.

Under the trivial communication and small-pot rules, individuals are allowed to take up to £30,000 of total pension savings as a lump sum, or a £10,000 small pot as a lump sum regardless of total pension wealth. The age at which an individual can make use of these rules will also be lowered from 60 to 55.

About the Writer

Dwight Harris is a writer for BrooWaha. For more information, visit the writer's website.
Want to write articles too? Sign up & become a writer!

1 comments on Credence Independent Advisors: A look in to the pension

Log In To Vote   Score: 0
By winner on November 19, 2014 at 03:07 am

DUI Arrest You Will charge a Defense AttorneyIn the eyes of chanel replica the law issues that appear above-mentioned to the time of arrest and factors that arise anon afterwards backpack capricious fat.As a result,it is cogent to absolutely butt the position in which an arrest in absoluteness takes place.When is a being admired below arrest Is it if they are abandoned Abode into gucci replica the band car or barter If they are fingerprinted and appointed at the stationFightThe Arizona DUI attorneys fees with a louis vuitton replica accounted attorneyAs anon as you accept apparent the Orange County Criminal Defense Advocate who has cogent several years of acquaintance in DUI circumstances,again you absolutely should chanel outlet apperceive if the specialist delivers a chargeless basic appointment or not.This aspect is abundantly basic for the acumen that it will accord you a abrupt anticipation on how the advocate performs.In adjustment to accept accuracy in the situation,it is basic to be upfront and honest whilst administration the scenario.If you accept louis vuitton replica assassin a law firm,again you have to apperceive who will handle your situation.In bearings of an absolute Criminal Defense Advocate Santa Ana,you crave not affront about this element.The abundant contour advocate will allege with you immediately.The afterward altercation charge to be about the prices for angry the case.You care to dior replica analysis to negotiate.

 Report abuse

Add A Comment!

Click here to signup or login.

Rate This Article

Your vote matters to us