MacRobins - Independent Financial Advisers to the Corporate Sector

Our services -- Personal Arrangements -- Pensions

The pension market is large and complex. Over the years there have been so many changes to legislation that Pensions have become the black sheep of the investment market. However since 6th April 2006, Pension Simplification (known commonly as A-Day) effectively stripped the market place down and ‘simplified’ its objectives. As there are many Pensions arrangements that are available, it is essential that you seek advice – especially if you have multiple plans. Below we have highlighted some of the arrangements available and some important information regarding Pension Legislation. For a comprehensive review of your pension situation please contact us to arrange a free consultation with one of our specialist advisers.

Stakeholder Pension Plans and Personal Pension Plans

These are both private pensions set up with a pension provider. Tax relief is available on the contributions, thus reducing the net cost to you. They are intended to give you a second pension fund to enable a secure retirement in addition to that supplied by the State Pension. If you require, you can arrange for DWP (Department of Work and Pensions) contributions that would usually be paid towards your state pension to be paid to your private pension instead – this is called ‘contracting out’ and your ‘protected rights’ DWP payments will be paid into your private pension. Stakeholder pensions are low cost and flexible with the charges being limited by statute. Personal Pensions often have comparable charges and usually benefit from a greater choice of investment funds, although law does not cap their charges. This is a diverse and competitive market place and in order to match the correct pension to your needs it is vital you seek advice from an Independent Financial Adviser.

Self Invested Personal Pension (SIPP)

This is a type of personal pension that extends the range of investment choices to include all asset classes permitted by law. A SIPP may be individual, or part of a grouped arrangement. These schemes tend to be popular with high net worth individuals. SIPP plans allow the holder to make their own investment decisions whilst managing to sidestep both income and capital gains tax as SIPP plans benefit from the same tax relief as a standard private pension plan. The Inland Revenue has a full listing of what can be invested into a SIPP and currently these include unit and investment trusts, equities, cash deposits, shares and commercial property. The same lifetime allowance and yearly allowance rules as outlined in the pension simplification section still apply.

Drawing benefits at retirement

Pension schemes are structured to accumulate pension funds, which are to be used at the member’s retirement to pay the cost of providing benefits. The individual members normally have a great deal of control over timing and how these benefits are structured (eg in terms of pension commencement lump sum, indexation of benefits etc). MacRobins Ltd would offer consultation and advice as necessary for members approaching retirement.

Pension Simplification and reform

On April 6th 2006 (commonly called ‘A’ Day) new simplified rules came into effect surrounding all pension schemes. Changes were made regarding taxation, retirement age, contributions and annuities to name but a few. To fully understand how these changes effect your current pension situation, please contact us to arrange a consultation with one of our specialist advisers. Highlighted below are the key changes:

Minimum Retirement Age

From 6th April 2010 it will not be possible for individuals under the age of 55 to commence pension income benefits.

Multiple Pension Scheme Membership

An individual can be a member of as many pension schemes as they wish at the same time.

Pension Contributions

There will be a single limit on the tax-advantaged contributions that can be paid each year into pension schemes by, and for, an individual (this limit will be known as the ‘annual allowance’). The limit for individuals’ own contributions, at 100% or earnings, are significantly higher than before ‘A’ Day.

Maximum Pension Benefits

The maximum pension limits that the Inland Revenue had in place will be removed. Instead the total value of an individual’s tax privileged pension must fall below a new limit which will change annually. This will be known as a ‘Lifetime Allowance’.
Any money in excess of the lifetime allowance will be subject to a 55% charge if taken as cash or a 25% charge if it is to be used to provide pension income.
If an individual has accrued a very high pension value prior to April 6th 2006 they can apply to the Inland Revenue to protect those pensions from the Lifetime Allowance charge. This protection must be sought before 6th April 2009.

Retirement Cash Lump Sums

The maximum cash sum available from all schemes will be 25% of the capital value of the benefits held under each scheme. This does not include any value above and beyond the current lifetime allowance.
Some occupational pension schemes will have tax free cash allowances set at a higher rate and these will be protected – however contributions made after 6th April 2006 will be subject to the maximum 25% tax free cash legislation.

These are only a handful of the changes made by pension simplification. Many other changes have been made and all of them can be explained by our dedicated team of advisers.

Pensions reform

The changes in pensions law and practice outlined above are not the end of the proposed reforms. Further proposals have been put forward which will make major changes to state pension benefits, including a progressive increase in the state retirement age to 68 by 2040, and a plan to restore the indexation link between state pension benefits and earnings.

It is also planned that there should be a new system of Personal Accounts under the general title of the National Pension Savings Scheme (NPSS). This will be a simplified, inclusive and extremely low-cost pension scheme. Under this scheme, every employee will be auto-enrolled for pension, although it will be possible to opt out. All employees will then receive an employer contribution to their pension, at an indicated rate of 3%, and have to pay a personal contribution, indicated at 4% net.

It is expected that where an employer provides an alternative of suitable quality for ALL employees that they will be allowed to continue with this as an alternative. However, it will be mandatory, for the first time, for employers to offer a pension contribution for every member of staff. This is expected to have a major impact on the shape of corporate pension provision in the future.

As the new rules and structures become clear, our consultants will be available to offer guidance.



Our services -- Personal Arrangements -- Pensions The pension market is large and complex. Over the years there have been so many changes to legislation that Pensions have become the black sheep of the investment market. However since 6th April 2006, Pension Simplification (known commonly as A-Day) effectively stripped the market place down and ‘simplified’ its objectives. As there are many Pensions arrangements that are available, it is essential that you seek advice – especially if you have multiple plans. Below we have highlighted some of the arrangements available and some important information regarding Pension Legislation. For a comprehensive review of your pension situation please contact us to arrange a free consultation with one of our specialist advisers. Stakeholder Pension Plans and Personal Pension Plans These are both private pensions set up with a pension provider. Tax relief is available on the contributions, thus reducing the net cost to you. They are intended to give you a second pension fund to enable a secure retirement in addition to that supplied by the State Pension. If you require, you can arrange for DWP (Department of Work and Pensions) contributions that would usually be paid towards your state pension to be paid to your private pension instead – this is called ‘contracting out’ and your ‘protected rights’ DWP payments will be paid into your private pension. Stakeholder pensions are low cost and flexible with the charges being limited by statute. Personal Pensions often have comparable charges and usually benefit from a greater choice of investment funds, although law does not cap their charges. This is a diverse and competitive market place and in order to match the correct pension to your needs it is vital you seek advice from an Independent Financial Adviser. Self Invested Personal Pension (SIPP) This is a type of personal pension that extends the range of investment choices to include all asset classes permitted by law. A SIPP may be individual, or part of a grouped arrangement. These schemes tend to be popular with high net worth individuals. SIPP plans allow the holder to make their own investment decisions whilst managing to sidestep both income and capital gains tax as SIPP plans benefit from the same tax relief as a standard private pension plan. The Inland Revenue has a full listing of what can be invested into a SIPP and currently these include unit and investment trusts, equities, cash deposits, shares and commercial property. The same lifetime allowance and yearly allowance rules as outlined in the pension simplification section still apply. Drawing benefits at retirement Pension schemes are structured to accumulate pension funds, which are to be used at the member’s retirement to pay the cost of providing benefits. The individual members normally have a great deal of control over timing and how these benefits are structured (eg in terms of pension commencement lump sum, indexation of benefits etc). MacRobins Ltd would offer consultation and advice as necessary for members approaching retirement. Pension Simplification and reform On April 6th 2006 (commonly called ‘A’ Day) new simplified rules came into effect surrounding all pension schemes. Changes were made regarding taxation, retirement age, contributions and annuities to name but a few. To fully understand how these changes effect your current pension situation, please contact us to arrange a consultation with one of our specialist advisers. Highlighted below are the key changes: Minimum Retirement Age From 6th April 2010 it will not be possible for individuals under the age of 55 to commence pension income benefits. Multiple Pension Scheme Membership An individual can be a member of as many pension schemes as they wish at the same time. Pension Contributions There will be a single limit on the tax-advantaged contributions that can be paid each year into pension schemes by, and for, an individual (this limit will be known as the ‘annual allowance’). The limit for individuals’ own contributions, at 100% or earnings, are significantly higher than before ‘A’ Day. Maximum Pension Benefits The maximum pension limits that the Inland Revenue had in place will be removed. Instead the total value of an individual’s tax privileged pension must fall below a new limit which will change annually. This will be known as a ‘Lifetime Allowance’. Any money in excess of the lifetime allowance will be subject to a 55% charge if taken as cash or a 25% charge if it is to be used to provide pension income. If an individual has accrued a very high pension value prior to April 6th 2006 they can apply to the Inland Revenue to protect those pensions from the Lifetime Allowance charge. This protection must be sought before 6th April 2009. Retirement Cash Lump Sums The maximum cash sum available from all schemes will be 25% of the capital value of the benefits held under each scheme. This does not include any value above and beyond the current lifetime allowance. Some occupational pension schemes will have tax free cash allowances set at a higher rate and these will be protected – however contributions made after 6th April 2006 will be subject to the maximum 25% tax free cash legislation. These are only a handful of the changes made by pension simplification. Many other changes have been made and all of them can be explained by our dedicated team of advisers. Pensions reform The changes in pensions law and practice outlined above are not the end of the proposed reforms. Further proposals have been put forward which will make major changes to state pension benefits, including a progressive increase in the state retirement age to 68 by 2040, and a plan to restore the indexation link between state pension benefits and earnings. It is also planned that there should be a new system of Personal Accounts under the general title of the National Pension Savings Scheme (NPSS). This will be a simplified, inclusive and extremely low-cost pension scheme. Under this scheme, every employee will be auto-enrolled for pension, although it will be possible to opt out. All employees will then receive an employer contribution to their pension, at an indicated rate of 3%, and have to pay a personal contribution, indicated at 4% net. It is expected that where an employer provides an alternative of suitable quality for ALL employees that they will be allowed to continue with this as an alternative. However, it will be mandatory, for the first time, for employers to offer a pension contribution for every member of staff. This is expected to have a major impact on the shape of corporate pension provision in the future. As the new rules and structures become clear, our consultants will be available to offer guidance.	MacRobins Ltd 40 Great Portland Street London W1W 7ND Tel: 08456 300 740 Fax: 08456 300 750 www.macrobins.co.uk Required. Name Required.Invalid format. Email Required. Enquiry

MacRobins Ltd is an appointed representative of Phoenix Independent Advisers Ltd which is authorised and regulated by the Financial Services Authority	© MacRobins 2007
The contents of this website are for information purposes only, we recommend that you take advice from an Independent Financial Adviser before transacting any business.