The planning opportunity: Clients who have reached age 55 can protect their Annual Allowance of £40,000 by consolidating their savings into one plan and entering capped drawdown before 6th April
Conditions: Clients be aged 55 prior to 6th April in order to be eligible to enter capped drawdown. Once in drawdown any income taken must be within the applicable GAD limits. If this level is exceeded the client will automatically enter FAD and trigger the MPAA.
It gets better: Clients with existing capped drawdown plans will be able to designate further amounts for drawdown without triggering the MPAA providing total income withdrawn remains with GAD limits. This means clients can protect their Annual Allowance by crystallising a relatively small amount.
Suitable for: This may particularly suit “silver entrepreneurs” looking to set up a new business while retaining the ability to use profits tax efficiently to fund their retirement.
Block transfers
The current rule: Individuals who qualify for higher tax-free lump sums (PCLS) under pre-A Day rules which ended on 6th April 2006 can protect their benefits and retain this right, however the protection is usually lost on transfer to a new pension arrangement.
Primarily in order to protect members of employer-sponsored arrangements where individual members have limited control over the structure and management of the scheme, the legislation allows the right to an enhanced PCLS to
be retained if two or more members transfer their benefits at the same time – a so-called “buddy” or “block” transfer.
Trustees of existing schemes may choose to offer the retirement options available after 6th April but are not obliged to do so. It is unlikely that older schemes will make the changes necessary to offer the new options.
Up to 6th April 2015: a temporary relaxation in the rules will allow members of pre-A Day pension arrangements to retain their enhanced PCLS following transfer without the need for a “buddy” to transfer at the same time.
The planning opportunity: Clients with pre-A Day plans can transfer to a modern pension arrangement which allows them to access the new retirement options even if their current contract does not allow it.
Conditions: Clients must transfer all of their benefits under the existing arrangement in one transaction prior to 6th April and must take all of the benefits within the receiving scheme before 6th October 2015.
It gets better: As an alternative to the above clients with pre-A Day plans could choose to take their PCLS from their existing pension and transfer the part of the fund designated to provide income from another arrangement. This is subject to the same timescales as above.
