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What difference does A-Day make?

Author: Alan Fowler (afowler@pwtadvice.co.uk) - 05/04/2006

Q. A-Day?

A. 6th April 2006, and some very sweeping changes to pensions went live. Key changes were an overall simplification - out went the old complex pensions tax regimes, including the restrictions on high earners. In came the new £1.5m lifetime limit on the value of a member's pension pot and a simple annual allowance for contributions (up to £215.000 pa). Other key changes included allowing more flexibility (for example, to take pension whilst still working) and changes to the
benefits that may be paid (for example, greater tax-free cash and changes to benefits payable on death).

Q.There's been a lot of media coverage on what A-Day means for individuals. But I'm an employer and run a pension scheme - what should I be doing?

A. Probably more a question of what ideally you should have done. What you need co do will depend partly on what type of scheme you operate. If it is run by a pension provider. It's likely they will already have contacted you, but if not, contact them - they may have a ready-made
package of changes, but still check that it makes the changes you want - not all may be appropriate to your circumstances. Otherwise, contact your main pensions
adviser.

Q. What are the Pros & Cons of A-Day for Employees?

A. It is difficult to see any real downsides for
most employees. A-Day presents potentially very significant opportunities, especially (but by no means only) for higher earners. This is chiefly because of the greater flexibility in the way benefits can be structured to better meet
member's needs. It is well worth individuals considering some independent financial advice on how any flexibility in their pension arrangement(s) can be used to their best
advantage. For those in occupational pension schemes though, just how much of the flexibility will be available to them will be affected by the amendments the employer and the scheme trustees make to the scheme.

Q. What are the Pros & Cons of A-Day for Employers?

A. Employers can offer more flexibility, and in many cases there will be little or no associated direct extra cost. Some costs are though likely in implementation, for example of flexible retirement/pension options and in making
required changes to occupational pension schemes. Employers will also need to consider how the flexibility will fit with their business generally and how packages for senior executives are structured going forward.

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Please Note:
These articles were based on the legislation in force at the date of publication. The laws may well have changed since. These articles should not be taken as being or replacing proper legal advice.

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