‘A’ Day, the ‘Appointed’ Day (honestly!), took place on 6/4/06. The principles of “simplification”, established in the Finance Act 2004, are now enshrined in the statute book. There were some changes, two Finance Acts in 2005, the Chancellor’s Pre Budget Report in December 2005 and the Finance Bill and Act 2006, which passed into law on 19th July 2006. Clarifications are still awaited in some areas but by and large it’s there in usable form.

The notion of “simplification is laudable, but in reality probably impossible to achieve in totality. This is pensions we’re talking about after all. Political expediency and lobbying by vested interests has eroded some of the initial proposals, but the basic thrust of the main proposals has come to fruition. In summary, what we now have is:

• A single tax regime
  
  
• The ability to save in more than one pension scheme
  
  
• You can save as much as you like but the tax relief is limited
  
  
• Tax relief is available on contributions of up to 100% of your earnings (to a max of £215k pa, rising to £255k pa in 2010/11)
  
  
• If you don’t pay tax you can contribute £2,808. The government will pay another £792
  
  
• Flexible retirement: you can draw a pension and continue to work
  
  
• You can take up to 25% lump sum, tax free from your fund
  
  
• The maximum tax free size of your pot is £1.5m (rising to £1.8m by 2010/2011)
  
  
• Individuals with larger funds will have 3 years to arrange protection
  
  
• You can retire at 50 (rising to 55 in 2010/2011)

On the face of it, that’s quite simple, certainly simpler than what went on before but, as always, the devil’s in the detail. Under the new regime, you can effectively invest in anything. It’s just that some investments are tax free and others are taxed punitively. Caution recommended.

Residential property is back on the agenda as a tax free investment, provided you structure it as a “genuinely diverse commercial vehicle” (ugh!). This in effect can be a fund, a unit trust, a REIT and in many cases, a syndicate, which is probably the cheapest option. This change was widely ignored by the press – presumably they’d found even worse news to focus on like immigration or NHS failings, although the Guardian called it “a government climb-down”

As always in pensions, it’s what you can use them for that’s interesting, and it’s the application of the new rules that interests us. There are major opportunities for advisers and clients in this legislation. Effectively there is hardly an area of business or personal tax planning that is not affected by “simplification”;-

Our role in this process is to work with the adviser to develop a viable plan for clients. This is often for the long term. Our specialism is in pensions and consultancy – the art of the possible. We don’t give financial advice.

CORPORATE PENSIONS

As with the Finance Act 2004, there was parallel legislation affecting corporate Schemes in various Pension Acts. Among the main topics covered were:

Pension Protection Fund (PPF) which has been in place since April 2005

Financial Assistance Scheme with £400m set aside to compensate scheme members who have lost out

Greatly increased liabilities and demands on trustees leading to Independent Trustee appointments

Member Nominated Trustees to be one third of trustees unless an Independent Trustee appointed as sole trustee

Requirement for DC schemes to provide payment indexation is removed

The requirement to provide AVCs is similarly removed

Modification of any accrued benefit needs member agreement

FRS17 goes live

Reporting requirements change

Basically it’s a minefield. It’s generally perceived as too little too late, and has been accompanied by a plethora of DB scheme wind-ups and accompanying prophets of doom forecasting the demise of the ones that are left. It’s very difficult to disagree. The demands on scheme trustees are frankly untenable, and a minimum requirement for such a role is probably an MBA, as trustees rapidly assume the role of a “shadow board” in some companies. In this context, the role of Independent Trustee is probably best defined as a non executive director. We offer the following services to Corporate Schemes:

• Independent Trustee services (plus we have relationships with other firms who can provide full actuarial, administration and legal services)
  
  
• Consultancy and Trustee training services
  
  
• Due diligence services on pensions in the sale/purchase of businesses.
  
  
• Back office and technical support
  
  
• Procurement of professional services

The major point about our services is that they are designed to provide everything a scheme needs on a regular basis, but at affordable fee levels. It is not our intention to add further excessive financial burdens to schemes which may already have financial problems.

HOW TO USE THIS WEBSITE.

This website has been extensively updated with new information and downloads. This is an ongoing process and we also issue regular newsletters by email which you will find in “Pension News” or the archive. The information included is our view of what is going on and changing. We try to keep up with the changes, which show no signs of abating but if we miss any, please don’t hesitate to contact us

We try to communicate in plain English, and we don’t do “War and Peace”. Our downloads are typically one or two pages, many of them covering very specific topics such as:

• Trivialisation
• Borrowing or Lending in SIPPs/SSASs
• Alternatively Secured Pensions (ASP)
• Family SIPP

Other downloads are more general. There are also specialist areas on the site covering, for example, residential property investment (including overseas property) and unquoted shares. These are easy to find.

We have developed this website as a resource for advisers and will continue to develop and update it on a regular basis. If you have any comments or require any specific information that’s not included, please contact us by Clicking here

The information contained on this website is based on our current understanding of legislation. This may be affected by further changes in law, which are obviously beyond our control. We will always attempt to ensure the site is up to date, but we make no guarantees.