Pensions tax regime
You may recall we wrote to you along with your 2005 benefit statement informing you of a new tax regime for pensions. This came into force on 6 April 2006 and was widely publicised as A-day.
This is a reminder that if you have substantial retirement benefits you need to register for protection directly with Her Majesty’s Revenue & Customs before 5 April 2009. This is your last opportunity.
We strongly recommend you seek advice from an Independent Financial Adviser if you are unsure of your position.
What are substantial retirement benefits?
The tax changes introduced an overall limit on pension savings which could benefit from tax relief. This is known as the Lifetime Allowance and was initially set at £1.5 million, (which translates to an annual pension of approximately £75,000 in a defined benefit (final salary) scheme), rising to £1.8 million by 2010/11. The rate at which the Lifetime Allowance may be increased by the Government after 5 April 2011 is expected to keep pace with inflation.
Scheme members who already had substantial retirement benefits at A-day are able to take advantage of two forms of protection under the provisions of the Finance Act 2004:
- ENHANCED PROTECTION offers protection for all benefits against the Lifetime Allowance charge. The protection is available to any individual with benefits accrued at A-day and allows the value of pre A-day benefits to be linked to indexation or movements in future earnings or investment growth, although no further benefits may be accrued under defined benefit (final salary) schemes or further contributions made to defined contribution (money purchase) schemes; and
- PRIMARY PROTECTION allows a member with benefits in excess of £1.5 million at A-day to elect to have a personal Lifetime Allowance which is equal to the deemed value of his benefits at that time. The deemed value then replaces, and grows in line with, the standard Lifetime Allowance.
Members wishing to elect for protection of existing pension benefits have three years from 6 April 2006 in which you need to notify Her Majesty’s Revenue & Customs of your intention to register for protection.
Cheviot Financial Planning Ltd (CFPL),
CFPL is a subsidiary of The Cheviot Trust and an Independent Financial Adviser. If you think this service would be useful to you, you can contact them on 01702 390290 (telephone), 01702 354364 (fax), cfpl@cheviottrust.com (email), or by post at Cheviot Financial Planning Ltd, Cheviot House, 70 Baxter Avenue, Southend-on-Sea, Essex, SS2 6JA.
(updated 19th November)
Benefit Statements as at 31 December 2007 have now been issued to members of The Money Purchase Scheme of The Cheviot Trust and active members of the Final Salary Schemes. If you have any queries with regards to this statement, please complete and return the comments form enclosed in the pack.
(updated 6 August 2008)
Benefit Statements as at 31 December 2007 will be issued next week to members of The Money Purchase Scheme of The Cheviot Trust and active members of the Final Salary Schemes.
(updated 29 July 2008)
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