The UK already has a complex pension regime but the new coalition are about to change the rules again. The aim of the changes is to increase the flexibility when pensions come into payment. As always there are a number of implications for those planning their pension provision.

Please note at this time these are just proposals and there is to be further consultation, but it is likely many of the proposals will be implemented.

Some of the key proposed changes are as follows:

The age at which you have to buy an annuity has recently been extended to age 77 from 75. It is likely the maximum age will disappear altogether.

Consideration is being given to the level of tax free lump sum which can be provided, currently 25% of the value of the fund. This will be subject to a minimum income guarantee.

The level of tax applied on death to a fund when benefits are in payment, but not in an annuity, will also change. Currently in unsecured pension there is a tax charge of 35% and in alternatively secured pension an effective rate of 82%. The new rate is likely to be 55% across the board

A critical change relates to tax relief and contribution levels. Complex rules regarding high earners will disappear and a maximum annual contribution level of £50,000 will be available. Full tax relief can be obtained on this amount.

The message for those who are about to take their pension is to consider the likely changes and for the rest of us how can the new rules improve our retirement funds?

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