Pensions Simplification
Minimum
pension age and the general benefit rules
A
minimum pension age of 55 will apply by 6 April 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 honoured and employment terminates before
the pension is vested.
People
in pension schemes at A-Day (6 April 2006) 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 by for example a professional footballer would reduce
the lifetime allowance by 50%. Then the remaining 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 generally up to the £1.5m lifetime
allowance, may be paid as a tax-free lump sum.
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