What do these changes mean for you?

Building up a pension pot

If you are making regular contributions of more than £50,000pa into your pension arrangements or are thinking of doing so in the future, then it is likely that these changes will affect you. This limit also includes the value of benefits accruing under employer pensions e.g Final Salary pensions
You have the opportunity to pay in a larger lump sum of over £50,000 (subject to sufficient relevant earnings) if you haven’t maximised your pension contribution allowance in the previous three tax years
A pension contribution period is referred to as the ‘Input Period. In certain circumstances where a pension scheme’s ‘Input Period’ is not aligned to the tax year a tax charge may arise on larger contributions. You may be able to avoid paying this tax charge by resetting your pension plan’s ‘Input Period’. Her Majesty's Revenue and Customs have recently announced that individuals will now have until the date the Finance Bill 2011 is granted Royal Assent (expected to be July 2011) to change their Pension Input Period
If the total value of your pension funds are currently over (or could potentially be over) £1.5m at or before retirement, you may be subject to a tax charge of up to 55% on the excess. If you are affected, by taking advantage of ‘Fixed Protection’ you have the potential to mitigate this charge but you have to stop paying contributions and accruing benefits into your pension plans. Application for Fixed Protection must be made by 5th April 2012 and will take effect from the 2012/13 tax year
Rules have also changed for employer pension schemes. We suggest you speak to your employer as to what actions needs to be taken if you are an active member

Coming up to retirement

You can decide when to take the tax free lump sum amount (up to 25% for most people) from your pension fund as long as you are age 55 and over. You should seek advice if you are planning to take your lump sum after your 75th birthday as from that age residual funds on death will be subject to tax
You can also continue to keep your pension fund invested for longer and benefit from virtually tax free growth. The decision about whether to buy an annuity or to draw an income directly from your pension fund can now be deferred indefinitely
There are new opportunities to draw higher levels of income from your pension fund (via Flexible Drawdown). To find out how this may affect you, please speak to your Private Banker in the first instance
Changes to rules due in December 2012 in relation to gender specific premiums and benefits will mean that annuity payments for women are likely to increase from December 2012 whilst for men, payments are likely to decrease. This is likely to be in the order of +/- 2% compared to current rules
This may mean that drawing an income directly from your pension fund instead of buying an annuity may be a better option for some individuals.

Already retired and currently in drawdown, ASP or Annuity

From 6th April 2011, those individuals who are drawing the maximum income directly from their pension fund could see their incomes reduce at the next five yearly review date. This is because the maximum amount of income that can be drawn will be 100% (currently 120%) of a comparable annuity based on tables produced by the Government Actuary's Department (GAD). If you qualify for Flexible Drawdown you can avoid this reduction
Alternatively Secured Pension (ASP) is the current name given to a Drawdown Pension plan for individuals age 75 who do not wish to buy an annuity. If you are an existing ASP member, you will automatically move to Capped Drawdown on 6th April 2011. The benefit of this is that any remaining lump sum will be available to your family on death subject to a 55% tax charge. Under the current rules, if there are no living dependants a payment could be made to a charity (tax free) otherwise a 82% tax charge would be payable). Maximum Drawdown Pension levels should also increase on moving from ASP to Capped Drawdown