Pensions A-Day

This is a quick summary of the changes to the rules and regulations of UK Pensions, which came into force from 6th April 2006, and what they mean for you.

The new rules encourage people to start saving or save more towards their retirement so if you would like any advice about Saving for Retirement or to talk to us about these new rules, just speak to a financial adviser in your local branch or ring us on 0845 7654321 to arrange an appointment.

A-Day changes – 6 April 2006

Some of the main A-day changes are:

 

• You can contribute larger amounts into your pension fund than previously, up to the limit of your annual salary and still obtain tax relief. (Non-earners and those earning less than £3,600 can continue to contribute up to £3,600 per year, as presently.)Contributions in the 2008/09 tax year above the Annual Allowance of £235,000 would be taxed at 40%.
• The earliest age from which you can take pension benefits is currently 50, but this will rise to 55 from 6 April 2010.
• The concept of a Lifetime Allowance has been introduced. Funds in excess of this amount may be liable to a tax charge, when benefits are taken. The Lifetime Allowance for the 2008/09 tax year is £1.65 million.
• More people will be able to take up to 25% of their pension fund as a tax-free lump sum.

Details of these changes are subject to individual contract terms.

Tax Benefits

As a reminder of the tax benefits of contributing to a pension plan, if you contribute say £80 per month it effectively becomes £100 per month as the government adds £20 in the form of basic rate tax relief. Higher rate taxpayers can claim additional tax relief through self-assessment. Tax benefits and relief on contributions depends on your individual circumstances and may change or be withdrawn without notice.  Any change could affect what you get back.

Kick start your retirement savings

You can give a boost to your pension fund by, for example, converting into pension contributions other forms of savings and investments such as ISAs, bonds or normal savings accounts. This could help you achieve the amount of income you’ll want to enjoy in your retirement. If you’ve not yet built substantial savings or investments, speak to us, especially if you’re worried about locking up your savings in a pension.
 

Please note that pensions are medium to long term investments. The value of pensions and investments can fall as well as rise. The level of pension you receive at retirement will depend on a number of factors including future investment performance, the level and number of contributions made, tax rules, annuity rates at retirement and the age you retire.

Saving for Retirement Advice Service

Our ‘Saving for Retirement Advice Service’ is an excellent way to obtain financial advice on pensions. If you have any questions or would like some help to Save for Retirement, just speak to an Abbey Financial Adviser in your local branch. Alternatively, to book an appointment, ring us on 0845 7654321. Lines are open 8am to 9pm Monday to Saturday.