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More Changes for Pensions – CII CF4, R04 and AF3

More Changes for Pensions – CII CF4, R04 and AF3

PensionsPension changes are happening next year. This article discusses further announced changes to pensions – useful for CII R04, CF4 and AF3 exam candidates.

We must all now be used to the pension changes happening in 2015, with those affected hopefully enjoying the prospect of the new responsibility they will have with full flexibility over drawdown for those with defined contribution pension funds.

Tax on Unspent Retirement Funds Scrapped

What was announced a bit later was the fact that the 55% tax on unspent retirement funds will be scrapped from April next year.  Under the existing rules anything left on death can be passed on less 55% unless the member is under 75 and the beneficiary is a spouse, civil partner or a dependant under 23.  What will happen in future is that if the pension member dies before 75 whether or not the pension fund has actually been touched can pass to their families free of tax even when they make withdrawals.  For those members that die over 75 there won’t be the 55% but they will pay an income tax charge on withdrawals at their marginal rate – so basic rate taxpayers will pay 20%, higher rate 40% and additional rate 45%.  Good news all round.

A Rise in Pension Age

Not so good is the planned rise in the normal pension age for private pensions from 55 to 57 in 2028 which will then be linked 10 years below the SPA, which is due to increase in line with life expectancy rises.  Currently the SPA for men and women is due to hit 67 by 2028.  For those people under 40 it will mean they will not be able to access their private pension pots until age 58 and for those in their early 20s, they won’t be eligible for State pension until age 70 which will mean they can’t access any private pension savings until 60.

The change will apply to all pension schemes except public sector schemes for firefighters, police and armed forces where the pension age is not linked to SPA.

One of the few times it seems beneficial to be over the age of 40!

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