Overview of ’A’ Day
’A’ Day, 6 April 2006, saw some of the most significant reforms to pensions in the last 60 years. The changes are designed to encourage everyone to take control of their own pension provisions by making pension saving simpler.
The most significant changes to current pension rules are:
- Inland Revenue restrictions on pension contribution levels were removed. Now, up to 100% of earned income in any tax year, up to the annual allowance, currently £255,000 (tax year 2008/2009), may be invested in pensions with tax relief available.
- The new pension rules set a limit on the total amount of pension savings (including any pension life cover) that can be used to provide benefits on retirement or death. If benefits exceed the limit then the amount over could be taxed by up to 55%.
- 25% of the pension fund may be drawn as a tax free lump sum - an option available under some but not all types of pension.
- Rules about working until later in life and buying an annuity no later than age 75 were relaxed and there is increased flexibility for purchasing annuities and continuing contributions.
- Retirement age increased from 50 to 55 by 2010.
In addition, the lifetime allowance has been fixed up to and including the 2010/11 tax year, as follows:
2007/08 - £1.6m
2008/09 - £1.65m
2009/10 - £1.75m
2010/11 - £1.8m
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