Pension Advice for A-Day !
It has been claimed that A-Day is set to be the biggest shake-up
that pensions in the UK have experienced in over 60 years but it
has also left many wondering what A-Day is and what pension
advice they will need to prepare for it. Below we take a closer
look at A-Day and what it might mean for the average worker.
What is A-Day?
A-Day refers to the changes to the UK pensions which is set to
occur in April this year. What is the aim of A-Day?
The main idea behind A-Day is to "increase choice and
flexibility for all". The government's broad aim in the
introduction of the new pension rules in April 2006 is to
simplify the existing pension rules. The rules will affect all
pensions including personal and work pensions. In a nutshell,
A-Day aims to take the pressure off agencies that need to give
pension advice by actually simplifying the whole pension system.
What pension changes will occur with A-Day?
*The Standardisation of Tax Free Cash - The tax-free cash sum
entitlement currently differs between Pension Schemes.
Furthermore, the entitlement in the Occupational Pension Schemes
can actually be less than 25%. The simplified pension rules will
ensure that Tax Free Cash allowance of all Pension Schemes is
set at 25% of the fund value as standard. If you have an
occupational pension where the tax-free cash entitlement is
higher than 25% then you will need to seek pension advice from
an experienced Independent Financial Adviser, who will be able
to help you protect this right. *Alternatively Secured Pension -
An Alternatively Secured Pension will also be introduced which
will mean that after the age of 75 withdrawal of income will be
known as "Alternatively Secured Pension" and will be similar to
income drawdown. This allows you to draw an income, up to a
maximum of 70% of the highest single-life annuity, each year
from your pension fund. *Greater Flexibility in Investment -
There will also be greater flexibility in investment including
the provision enabling you to hold residential property within
your pension fund. You may also be able to sell and buy these
properties between individuals. *Contributions - The amount you
can currently contribute into a pension scheme is capped but
A-Day is set to change all this. As of April this year, there
will be no maximum amount of pension saving.
Who will be affected by these pension changes? Actually nearly
everybody who will work or has worked will be affected by these
pension simplification rules. It will impact on any individual
who already has a pension in place or any individual who will
start a pension plan at any point in the future. Where is the
best place to get pension advice regarding A-Day?
It is always highly advisable to discuss any pension advice you
may require with a professionally trained financial adviser. It
is also worth noting that you should always check that any
financial adviser you speak to is registered with the FSA and is
thereby duty bound to offer you unbiased advice.