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Pensions in the Bill
Details of further pension tax simplification measures to be included in Finance Bill 2006 have recently been announced.
Transitional protection and death benefits
The Government proposes to include legislation in Finance Bill 2006 to extend the transitional protection rules so as to:
Pensions in the Bill
Details of further pension tax simplification measures to be included in Finance Bill 2006 have recently been announced.
Transitional protection and death benefits
The Government proposes to include legislation in Finance Bill 2006 to extend the transitional protection rules so as to:
- allow insurance premiums to continue to be paid into policies paying lump sum death benefits where the benefits payable under such policies remain those that would be payable under the terms of the policy as they stand at 5 April 2006; and
- protect the amount of stand-alone lump sum death benefits that would have been payable were the individual to have died immediately before the start of the new regime, in the event of death benefits being subsequently payable because of the death of the individual within the term of the policy.
Bridging pensions
Legislation will be introduced in Finance Bill 2006, so that schemes may reduce the rate of scheme pension payable when a member reaches state pension age, regardless of whether he or she has an actual entitlement to state pension. For schemes that contract-out of the state scheme, a reduction in the rate of scheme pension will be permitted of up to the maximum annual amount of basic state pension. For contracted-in schemes, a higher reduction of the rate of scheme pension payable will be permitted of up to two times the maximum basic state pension.
Excess contributions lump sum
Legislation will ensure that where a member is given relief on contributions through relief at source, the limit on the refund of excess contributions' lump sum will exclude the amount given through relief at source on the excess contributions made by the member.
Migrant member relief
A regulation-making power in the Finance Bill 2006 will allow migrant workers to continue to get migrant member relief on contributions to their overseas employer's pension scheme where changes have taken place to the scheme.
Maximum permitted pension
Certain schemes do not allow exchange of pension for lump sum, and the rules as they stand have the effect of depressing the total value of the rights that members of these schemes can protect. The Finance Bill will amend the computation of maximum permitted pension for such schemes so that the value of the separate lump sum is reflected in the formula.
Two additional measures are as follow. One is a minor amendment to clarify the lifetime allowance provisions. The other is an amendment to the definition of abatement for public sector schemes. Abatement, as currently defined, may be applied only where a member retires and is re-employed in the public sector. The amendment will also allow a reduction of a scheme pension payable by a public sector scheme where a member does not retire on becoming entitled to his or her pension.
www.hmrc.gov.uk
