New pensions simplification rules are set to come into force in 2006. Part of these rules changes mean that all the complex calculations of maximum pension contributions and maximum tax free cash calculations such as 2.25 X pension as a cash sum may disappear.
Our view
More Cash 1 - One rule means that if your pension pot is below a triviality level of 1% of the new lifetime contributions limit £1.5m (for 2006) i.e. £15,000 you can take your whole pension fund as cash and not have to buy an income.
More Cash 2 - Another new rule means that if you have a large pension fund you are not restricted to 1.5 X your salary (linked to the Earnings cap of £102,000) i.e. a maximum tax free cash sum of £153,000 - but could now take up to 25% of the fund i.e. 25% of the fund - which if we use the lifetime limit is £375,000.
If you are due to retire now - - you really need to take advice. Contact us for advice today.