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YOUR REFORM QUESTIONS ANSWERED...

Q. WHY are the changes being introduced?

A. To simplify the rules governing pensions by reducing the eight tax regimes that apply to pensions and replacing them with just one set of rules. It's hoped people will then save more towards retirement.

Q. What are the changes?

A. The Government are abolishing limits on how much can be saved into a pension, replacing them with an annual allowance. People can then invest up to 100 per cent of their earnings in any one tax year.

A lifetime allowance on the level of saving that can qualify for tax relief is being introduced.

Q. What will happen when I retire?

A. The age at which people can draw their pension is being increased from 50 to 55 by 2010. But you will be able to continue working for a firm you are receiving a pension from.

Everyone should be able to take 25 per cent of their pension as a tax-free lump sum, and will have flexibility in annuities they use their fund to buy.

Q. Will these changes affect me?

A Pensions experts claim they will affect nearly everyone saving. In reality, many will not be impacted until they retire.

Q. Do I need to do anything?

A. Folk who think their pension fund may exceed the lifetime limit in future need to take action within three years to protect their benefits.

People who can take more than 25 per cent of their pension as a tax-free lump sum can continue to do so after A-Day, but they must make sure their scheme trustees have records.

Q. What does A-Day stand for?

A. Nothing. It was used in the first consultation as there was no date for the changes.
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Title Annotation:Business
Publication:Daily Record (Glasgow, Scotland)
Date:Apr 7, 2006
Words:289
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