Pensions Simplification

Minimum pension age

A minimum pension age of 55 will apply by by 2010. Any occupational scheme member with a right to draw a pension after age 50 may keep that right so long as that right was contractually present before 10 December 2003 and the pension is fully vested when the right is honored and employment terminates before the pension is vested.

People in pension schemes at A-Day with a low normal retirement age will keep their existing rights to take benefits early, but a reduction of 2.5% will apply to the lifetime allowance for each year before 55. So a pension taken at 35 would reduce the lifetime allowance by 50%. Then 50% of the lifetime allowance remains unused to be carried forward in determining the amount of any further tax-privileged savings that may be built up. It is not proposed to apply reductions in the lifetime allowance to pre A day members of the armed forces, police and fire services. Incapacity early retirement will continue to feature.

The general benefit rules

Pension benefits must:

• Start before 75, but not before 55 (age 50 until 2010)
• Not be assignable.
• Last for the remainder of the person's life
• Be paid at least annually.
• Not be guaranteed for a minimum period greater than 10 years.
• Not offer a capital guarantee, until age 75, of more than value protection.
• Lie between minimum and maximum income limits.
• Be taxed under PAYE.

Up to 25 % of the pension capital value below the £ 1.4m lifetime allowance, may be paid as a tax-free lump sum.