The 2012 Pensions 'A-Day' Bomb

On 6th April 2006, sweeping changes to personal and workplace pensions came into force affecting how and when people can retire.

Dubbed 'A-Day' the rule changes were deemed to make pensions simpler and more straightforward, but applied a lifetime allowance cap on the total value of individual pensions at £1.5million, rising to £1.8million by 2011.

Fast forward to the present and those high net worth individuals (HNWIs) whose pension funds have exceeded the £1.8million cap will now face a punishing 55% tax   rate at retirement.

And though some HNWIs may deem themselves both as being years away from retirement and not yet near to the cap figure, if investments grow well you may find yourself in the 'A-Day' zone.

Consider a final-salary pension (yes, the extinct ones) which do not have a fund as such, who thus face a calculated value at 20 times annual pension.  This means even an entitlement of £30,000 per year is deemed to be worth £600,000.

For the few who treble that figure you'll now be at the tax precipice and need to do something about it.  Fast.

While most pensions pay a tax-free lump sum on retirement and then a regular income, the tax free amount is currently fixed at 25%, an increase for some pensions and a reduction for others.

What to do?  HNWIs with A-day pension values in excess of £1.8million can protect their funds from the Lifetime Allowance Charge by coming in and talking to us.

Contact us on 01506 842 365.

Written By Ed Emerson, Editor of HNW Magazine