Following the Chancellors Pre Budget statement of 6th Dec 2006 changes are proposed in relation to pension benefits post 75 which will come into force from 6th April 2007.More details will follow in due course.

The pensions industry has undergone radical change and so it is more important than ever to get the best possible advice. Since 6th April 2006 a level playing field has been created and broadly speaking, regardless of the type of arrangement you ultimately select, the funding and receipt of benefits is on the same basis. The edited highlights of the so called Pension Simplification are as follows:-

Member contributions. The higher of £3,600 per annum or 100% of earnings can receive tax relief subject to the annual allowance limit (see below)
Employer contributions. Contributions should theoretically be unlimited up to the annual allowance limit as long as an overall package of benefits can be justified to the Inland Revenue. Your accountant's involvement is invaluable here and Spectrum clients benefit from the close working relationship with Ashdown Hurrey.
The annual allowance will increase as per the following table:

TAX YEAR	ANNUAL ALLOWANCE
2006/2007	£215,000
2007/2008	£225,000
2008/2009	£235,000
2009/2010	£245,000
2010/2011	£255,000

Concurrency. Anyone will be able to join any type and any number of registered pension schemes at the same time as long as they remain within the prescribed limits.

Standard Lifetime Allowance

The funding rule book has been thrown away and replaced by the Standard Lifetime Allowance (SLA). This represents the maximum amount that an individual may hold in their pension scheme, which will increase each year as per the following table:-

TAX YEAR	SLA
2006/2007	£1.5 million
2007/2008	£1.6 million
2008/2009	£1.65 million
2009/2010	£1.75 million
2010/2011	£1.8 million

Investment

There is one set of rules for all pension schemes.

Scheme borrowing, - limited to 50% of the market net value of scheme assets.
Loans to the employer (occupational pension schemes only) - up to 50% of the market value of the scheme with a maximum of 5 years. Any such loans must be secured.
Shares in the sponsoring company (occupational pension schemes only) - will be limited to 5% of the scheme net assets.
Connected party rules - no longer any restriction.
Pensioneer Trustee - no longer required but best practice will be to utilise the services of a professional.
Property - no change in the rules insofar as commercial property is still allowed and residential property is not.

Investment

The two types of protection are primary and enhanced.

PRIMARY	ENHANCED
Benefits must be within HMRC limits before A Day	Benefits must be within HMRC limits before A Day
Benefits value must be over £1.5 million on A Day	Must be registered with HMRC by April 2009 but all contributions to money purchase schemes must cease from A Day and there can only be limited accrual under defined benefit schemes from A Day. The only exception is contracted out rebates to an existing scheme
Member can continue to accrue benefits within limits after A Day	All contributions to money purchase schemes must cease from A Day and there can only be limited accrual under defined benefit schemes from A Day. The only exception is contracted out rebates to an existing scheme
Lifetime allowance charge (LAC) may still be due if benefits value exceeds personal lifetime allowance	No test against the lifetime allowance as long as enhanced protection remains.

MINIMUM AND MAXIMUM PENSION AGES

From A Day to April 2010 the minimum age to access benefits will be 50, however, benefits on ill health at retirement can be taken earlier.
From 2010 the minimum age will be raised to 55 but once again benefits on hill health grounds can be accessed earlier.
From A Day income must be provided by a secured pension or alternatively secured pension by age 75.

TAX FREE CASH

The pension commencement lump sum (PCLS) will be 25% of the benefits value up to a maximum of the SLA at vesting.

INCOME BENEFITS ON RETIREMENT

There are a number of options as follows:-

Secured pension

Lifetime annuity - money purchase schemes only
Scheme pension - defined benefit schemes can only provide a scheme pension. Scheme pension also available for money purchase schemes

Unsecured pension

Similar to current income drawdown
Can be used up to age 75
Maximum amount 120% of the published GAD rate with no minimum amount
Income levels must be reviewed every five years, or
Short-term annuity

Alternatively secured pension

Maximum amounts are 55% to 90% of the published GAD rate at age 75
Income levels must be reviewed every year

Triviality

The following must apply:-

No previous trivial lump sum paid
All of the benefits under the scheme have to be taken at the same time
The total benefits value of the individual's pension savings is not more than 1% of the SLA in force at the time
The member has some SLA available
The member is between ages 60 and 75
After the payment the member has no rights left in the scheme
25% of the lump sum will be tax free with the balance taxed at the member's marginal rate

DEATH BENEFIT

Death benefit must be paid out within two years of death or they will be treated as an unauthorised payment and will be taxed at 40%.

Death before benefits are taken

Lump sum return of fund up to SLA tax free - excess subject to 55% tax charge and/or
Dependants' pensions

Death after benefits are taken

Secured income - pension protection
- initial purchase price less income paid to date
- subject to 35% tax
- paid to member's estate or trust

- continuation of payment of any pension guaranteed for up to ten years
- any dependant's pension

Unsecured income
- lump sum less 35% tax

and/or

Dependant's pensions

Alternatively secured pension
- Dependant's pension

- Donate to charity
- Allocate to another scheme member subject to a series of tax charges amounting to 82% of the fund

A dependant is a married spouse or an ex spouse (or a civil partner) of a member if they were married when the member first started to receive the pension, child under 20 or a child who is financially dependent because of physical or mental impairment and anyone else who is financially dependent.

Spectrum provides specialist advice in relation to Self Invested Pensions ie a Small Self Administered Scheme (SSAS) or Self Invested Personal Pension (SIPP). These arrangements offer the maximum in terms of flexibility and control. Contact Spectrum now to see how you can benefit from membership of such an arrangement.

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