Finance Act 2004 (2005) - Pensions - Any clear explanations

virgo17

The Finance Act of 2004 as ammended by the Finance Act 2005 made quite a lot of changes to company pensions. One of the options is to take a lump sum and continue working for the same employer until reaching retirement age in that particular scheme.

My employer has produced a leaflet describing how the changes will be implemented. Unfortunately the wording is as clear as mud in some areas. I realise that some of these changes are employer specific but I would like to see what is actually said in the act.

Can anyone point me to an explanation of what the acts says about pensions in laymans terms. A web site or 'idiots guide' would be most welcome.

Thank you.

V.

Cook_County

I suspect that you are referring to A Day. Reading the Act will be of little practical use because large parts refer to prefer legislation and changes thereto. Much of the A Day changes are promulgated by HMRC (but not all, there are other government agencies involved too). However even with only 2 months to go the changes are not yet all publicised or agreed.

What would you like to know specifically?

klondyke

Cook_County wrote:

What would you like to know specifically?

Any announcement yet about what they intend to do about IHT if not taking annuity at 75?

Debt_Free_Chick

klondyke wrote:

Any announcement yet about what they intend to do about IHT if not taking annuity at 75?

What circumstances are you thinking of? As I understand it (and it's all new to all of us!) a lump sum cannot be paid if there is a dependant. Instead, the fund passes to the dependant to pay them a pension.

If there is no dependant and lump sum is paid, then I believe there's an unauthorised lump sum payment charge ..... I think it's 40% of the lump sum. But then I think the lump sum is treated as income in the hands of a recipient.

Sorry ... I'm not being very confident here, simply as it's all so new and I tend to work directly from the legislation. The Inland Revenue has a new technical manual for simplification ... but it ain't very simple :wall:

If you have the energy to plough through it, it's here

EdInvestor

klondyke wrote:

Any announcement yet about what they intend to do about IHT if not taking annuity at 75?

Not that I've seen.There has been a consultation underway on it.Quite a few people arguing for a continuation of the pre 75 drawdown rules (which give the remaining fund back to dependants minus a 35% tax charge ) on your demise.

THe current version of the new rules post 75 seem to suggest that the money can either go to a dependant (but still as an income, not a lump sum) or as a lump sum to a charity, but if not to the charity it will go to the scheme provider ( ie the lifeco or SIPP provider). Nobody supports this.

Nothing yet heard about the "family SIPP" idea which would mean you could bequeath the remainder of your drawdown to your children as a starter fund which they could later add to, and use when they retire to provide them a pension.

I thought that idea was quite a good one, as it would mean young people could concentrate on things like buying a home and educating their kids without worrying too much about a pension when young - realistically, how many young people can afford a pension these days?

dunstonh

It is starting to get alarming how close the Govt is leaving it with the final workings.