Pensions In The News We reported last year that the Government introduced legislation from 6 April 2006. This has had a major effect on pensions and how we all fund our retirement. The aim of these reforms is to make pensions more flexible and provide more opportunities to save, whether through company pension schemes or through personal pension plans. The main changes were:

Lifetime Allowance

Although this will only affect a few people, any pension benefits taken over the Lifetime Allowance will attract a tax charge. The Lifetime Allowance for the 2007/2008 tax year is £1.6 million and will rise each year reaching £1.8 million by April 2010.

Annual Allowance

Each year you can build up pension benefits up to the Allowance. Any build up of pension benefits over the Allowance will be taxed. The Allowance for the 2007/2008 tax year is £225,000 rising to £255,000 by April 2010, so again this will only affect a small number of people. All employees can pay into a personal pension scheme and an employer's scheme and can pay 100% of their earnings or £3,600 if this is greater.

Tax-Free Cash

When you take payment of your pension it's possible to exchange part of it for tax free cash up to approximately 25% of the capital value of your benefits which can include the value of any Additional Voluntary Contributions (AVCs).

Death Benefit

Final Salary members

For members of the Final Salary Section, the rules on death-in-service benefits haven't changed from 6 April 2006. If you die before your normal retirement age, whilst a contributing member, the Scheme will pay; a lump sum of four times your Salary or four times your annual Salary, together with a refund of your contributions with interest plus AVCs. Half of your pension will be paid to your dependants plus allowances (pensions) for any children you have.

Money Purchase members

For members of the Money Purchase Section, on death, the Scheme will pay twice your annual salary plus the value of your retirement account. Members can choose to pay for extra cover.

Lump Sum Death Benefits for members over age 75

From 6 April 2006 if you die aged 75 or over as a member of the Final Salary Section or Money Purchase Section of the Scheme or as a non member i.e. as an employee of the Company and not a member of the Pension Scheme, the lump sum death benefit will be subject to a tax charge of up to 55%. If you leave dependants they may direct us to pay the lump sum to an insurance company to buy a pension. If there are no dependants then the benefit would be paid to the estate less tax.

Change to early retirement age

It is currently possible to receive payment of your pension benefits from age 50. The minimum age will rise to age 55 from 6 April 2010 in line with Government legislation. Note that some other pension schemes may have different rules. The Trustees have stretched the date as far as possible to allow members the maximum flexibility when planning their retirement.

Flexible retirement and age discrimination

From 1 December 2006 the pensions section of the age discrimination legislation was introduced with the aim of giving people flexibility to reduce working hours in later life and take their pension benefits. Subject to Employer and Trustee consent, it is possible to receive payment of your pension benefits from both the Final Salary and Money Purchase sections of the scheme, while you continue to work.

Government Proposal for Personal Accounts

In 2012 the Government plan to introduce compulsory savings for retirement which should increase retirement savings and reduce the reliance on the State. Employees between 22 years of age and State Pension Age will be automatically enrolled if they earn more than a set limit unless they have access to a good Occupational Pension Scheme like the Kingfisher Pension Scheme. It's proposed that employees and employers will pay contributions on earnings between £5,000 and £33,500 per year.