personal pensions and contracting out

6 April 2006, also known as A-Day in pension law saw the Government making considerable changes and improvements to the way in which pensions will operate in the future. These changes provide greater investment flexibilities and are part of a review to encourage personal savings and reduce the Government¹s long-term burden of providing a valuable State pension.

It has also been proposed that the State Pension retirement age be raised to 68 by 2040!

Here are some of the other changes:

You can pay up to 100% of your earnings each year into your pension fund.
Your employer can make further large contributions over and above this.
If you have a company bonus and it is paid directly into your pension fund, you will no longer pay income tax on that bonus and your employer can also claim National Insurance tax relief.
You can take up to 25% of your pension fund as a tax-free lump sum from the age of 50 without having to draw an income. This age increases to 55 in 2010.
For those of you nearing 75, you will no longer have to purchase a pension annuity but can instead draw an income direct from your pension fund, helping you maintain control over your pension.
Your employer can contribute an unrestricted amount to your pension the year before you take benefits.

In light of these significant changes to the way in which private and occupational pensions now operate, it is more important than ever to ensure you are getting value for money from the pension provision you are making or have made in the past.

Amongst the important changes made are proposals to change the funding of the state¹s additional pension provision including the old Graduated State Scheme, State Earnings Related Pension (SERPs) and S2P the current extra provision. If you have contracted out of the state scheme you should review this decision.

At Willis Financial Services, we have assisted many clients in making important decisions about whether to contract Œin¹ or Œout¹ and how to make sense of the provisions already made for their retirement.

Don¹t be left out. Take advantage of the new rules regarding pensions and ensure that you have made the best choice for your long-term financial security. Contact the Willis Financial Services team today on 028 9032 9042 or complete our enquiry form to see how we can help you benefit with your pension planning.

All initial consultations are free and without obligation. We are not accountants or solicitors and our advice should be considered alongside the advice you receive from other professional advisers.