The Price we Pay for Pension Simplification

4 December 2007

Poor old pensions, what a battering they have taken by the taxman in recent years, and all in the name of simplification.

 

It should not really have come as a surprise that the Pre Budget Report on 9 October 2007 made further provisions to levy more tax charges on pensions. Just as people were starting to get their head around the new “simplified” rules introduced by the Finance Act 2006, further provisions have been proposed in the pre budget report on 9 October 2007.

 

The provisions were effectively anti-avoidance measures designed to treat any transfer of tax relieved benefits from one member to another on the first death as an unauthorised payment, which will give rise to an effective tax charge of 82%. It should be noted that these provisions will only affect those who have attained age 75 and have not purchased an annuity. The mechanism targeted has been a popular pension planning tool to enable families to provide for all members out of the excess pension of a pension scheme member.

 

There are numerous provisions that have been proposed, which put briefly have the effect of levying this tax charge where any pension benefit is either surrendered or transferred on death, to connected members of the same pension scheme. 

 

There are numerous measures that can be taken to mitigate the effect of these provisions, which we have access to.

 

If you would like to discuss how any of the above affects you, or any steps that may be taken now to avoid this charge, please do not hesitate to contact us.