Safeguarding Your Pension Assets

Changes to the tax regime governing pensions caused a stir for savers with large funds, although the Government did allow two key protection measures. The question now is, if you have not already done so, whether to elect or not to elect?

On 6 April 2006, the Government replaced eight separate tax regimes governing UK pensions with just one. While the majority of savers enjoyed greater flexibility, a small number were disadvantaged by the new rules and, in particular, the statutory lifetime allowance (SLA).

The SLA is the limit an individual can accumulate in a pension fund without incurring a recovery charge. If it is exceeded, a charge of 55% of the excess is payable when taken as a lump sum, or 25% if it is used to provide additional taxable income. The SLA currently stands at £1.65m, increasing to £1.75m in 2009/10 and to £1.8m in 2010/11. After this, increases will be made at the discretion