Newsflash!

Budget March 2012

The Economy

The Independent Office for Budget Responsibility (OBR) has revised upwards the UK forecast for 2012 from 0.7% to 0.8%.   The forecast for 2013 is 2%, for 2014 2.7% and for 2015/16 3%.   UK inflation is set to fall from 2.8% for 2012 to 1.9% for 2013.

Pensions

WEF April 2013 a new single-tier state pension will be introduced to be set above the means test at a minimum of £140 a week.   The Government is due to examine linking the state pensions age to life expectancy.

Child Benefit

This will be phased out when someone in a household has an income of more than £50,000, decreasing by 1% for every £100 earned over £50,000.   Only those earning more than £60,000 will lose the benefit completely.

Tax

WEF 21 March 2012

  • there is a new 7% stamp duty on properties worth more than £2m
  • there are also plans (15% stamp duty rate on properties worth over £2m within corporate envelopes) to clamp down on stamp duty avoidance by using companies to buy expensive properties.

WEF April 2013

  • the 50p top rate of tax levied on earnings of £150,000 or more will be cut to 45p
  • the personal income tax allowance will be increased to £9,205
  • age-related income tax allowances will be removed for new pensioners and replaced with the same personal allowance as the rest of the UK
  • there will be a new cap on tax reliefs set at 25% of total income for anyone claiming more than £50,000 in a year
  • Corporation tax will be reduced to 24%, with a further 1% reduction in 2013 and in 2014.

There will also be a simplified tax return process for small firms with a turnover of up to £77,000.

WEF April 2013/14

  • the higher income tax band will be reduced from £42,475 to £41,450.

 

Need advice?

01245 283594
Lines open Monday-Friday 9am-6pm
info@chelmsfordfinancial.co.uk

Latest money news

istock_000006154215xsmall.jpg

The Government has announced new Pension Annuity Rules

Wednesday, 09 March 2011 14:56
E-mail Print PDF

On 9 December 2010, HMRC published its draft Finance Act; this will affect the way pension benefits are taken.   The new rules have taken effect from 6 April 2011.   Below are the key points which are based on Chelmsford Financial Management's understanding of the draft legislation and HMRC guidance.   The draft legislation could change before it is laid before Parliament as actual legislation.   This information should not be taken as advice.

Key Points

  • You will no longer be required to take pension benefits by age 75.
  • You will be able to use income drawdown or take no income at all from your pension fund for as long as you like.
  • If you meet certain conditions, you will be able to take advantage of 'Flexible Drawdown'.
  • 'Capped Drawdown' will be introduced which will be similar to an Unsecured Pension (USP).
  • There will be changes to death benefits and tax charges.
  • If you are already in drawdown, there will be transition rules.
  • Annuities will continue to be offered.

The New Framework

1.     It will be posssible for your pension fund to remain intact for as long as you like because the age 75 rule will be abolished.   You will no longer have to set up an annuity or transfer into an Alternatively Secured Pension (ASP).   ASP will cease to exist.

If you have sufficient income, your pension can carry on growing tax free of UK income and capital gains tax.   After age 75 you will be able to withdraw up to 25% tax-free cash and use the rest to provide a taxable income via an annuity or income drawdown.

2.    A new 'Flexible Drawdown' option will be introduced which will permit you to withdraw as much income as you want and when you want it from your fund in retirement.   The income will be taxable.   However, you will have to meet a Minimum Income Requirement (MIR).   The minimum income will need to be a secure pension income of over £20,000.   Investment income does not count.   There will be limitations intended to stop you taking all your Protected Rights or from using 'Flexible Drawdown' whilst you are still building up your pension benefits.   You will be able to use part of your pension to purchase an annuity to secure the £20,000 and then move the remainder of your pension to 'Flexible Drawdown'.

3.     In 'Capped Drawdown',  the maximum income you will be able to take in each pension year will be 100% of the amount you would receive from a single level, life annuity.   This is slightly lower than the current maximum (120%).   There will be no minimum income, even after age 75.   The maximum withdrawal must be reviewed at least every three years, until the end of the drawdown year in which you reach 75 and every year thereafter (currently it is every five years pre-75 and every year thereafter).   The income available to you after age 75 will relate to your actual age, rather than defaulting to age 75, as is the case under current ASP.   This means that the percentage of your pension that can be drawn should increase as you get get older, rather than remaining inactive.

4.     The tax charge payable where a lump sum is taken on death if you are under 75, will change from 35% to 55%.  This will apply to all deaths on or after 6 April 2011.   The 55% tax charge will apply to crystallised and uncrystallised money on your death on or after age 75.   This means that lump sums on death, other than to charity will be allowed on death at age 75 or later.   There will continue to be no tax charge on death where pension savings are used to provide benefits other than as a lump sum to dependants.   The option to pass on savings tax-free to charity where there are no living dependants will continue to be available and will be extended to those under age 75.

5.     If you are already in drawdown (USP or ASP), you will not immediately be affected by the new requirements.   Transitional rules will apply and you will need to take up the new rules either at the end of your current review period or earlier if you transfer to another drawdown plan.

Drawdown is still a higher risk than an annuity and is a complex alternative.   If you are uncertain about its suitability for you, do contact us for advice on 01245 283594.

 

Last Updated on Friday, 01 July 2011 14:43