Big figures:

Latest figures from the ABI (Associationof British Insurers) show the UK insurance industry paid out over £188,000,000 PER DAY during 2006 in pension and life insurance benefits.

Thats £171 million per day in pensions and £17 million per day in life insurance benefits

Lasting Power of Attorney

The Mental Capacity Act 2005 introduced Lasting Powers of Attorney (LPAs) in October 2007. After that date no new Enduring Powers of Attorney can be issued.

Those already drawn up will remain effective as before but the new form of LPA is profoundly different.

Welfare and care issues can now be covered, as well as financial matters.

There are two separate forms of LPA and each must be registered before it can be used.

For guidance contact us or see www.guardianship.gov.uk

NEW PENSION LEGISLATION

a)     Latest Developments

A little while back the then Secretary of State for Work & Pensions stated that the new pension legislation   "seeks to entrench a new pension savings culture where future generations can take increasing personal responsibilty for building their retirement savings" 

-basically, we do have to look after ourselves in future !

Plans include......

1.  a low cost savings "personal accounts scheme"

• Automatic enrolment for employees (aged at least 22 and earning more than £5,000 p.a.) into the new pension scheme from 2012 or into an employer's pension scheme that meets minimum standards:
• Employees will contribute 4% of "band" earnings between approximately £5,000 and £33,000 a year
• Minimum employer contributions of 3%
• All contributions will be phased in gradually over the first four years
• 1% added as tax relief
• Employees may "opt out"
• Self employed and other non-employees will be able to join

2.  Changes to the State Pensions

    i)  increase in State pension age from 65 to 68 over the period 2024 - 2046

    ii)  basic state pension to be linked  to average earnings by 2012 ...."if affordable"

    iii)  S2P (State Second Pension) to become a "flat rate" addition to  the basic State pension over the period 2012 to 2030 ("or shortly afterwards") and will equate to approximately £60 per week in todays values.

    iv)  number of qualifying years for full basic State pension to be reduced to 30 years  - a major improvement.

    v)  new provisions for those looking after children, and other carers    

    vi)  new measures to, hopefully, simplify the system.

With the exception of Defined Benefit pension schemes, it will no longer be possible to opt out of the State Second Pension when the basic State Pension is re-linked to earnings.

b)  Pension changes on 6th April 2006

                                               (and subsequently)

Her Majesty's Revenue & Customs  (HMRC) introduced far reaching measures to simplify the rules governing pensions as from 6th April 2006.

Although the transitional rules are complicated, these will help to protect existing benefits and prevent abuse of the system.

The new rules started as an easier and more "user friendly" approach to pensions by HMRC.  Subsequent changes and modification have unfortunately made some of the important aspects now quite obscure and a good deal of caution is advocated when interpreting what initially appear simple rules.

The main points of the new "Simplification" legislation are:

1.  a large number of different tax regimes that applied to pensions are reduced to virtually one main one

2.  contributions can be made up to 100% of earnings in the particular year up to an Annual Allowance of  £235,000 (2008/09)

Contributions from the employer can contribute to the annual allowance but are subject to limitations (particularly through the Business Income Manual of HMRC)

3.  The total fund value and value of pensions already started must not exceed £1.65 million (for 2008/09 and increasing on a fixed scale to £1,800,000 in 1010/11)

4.  An annuity no longer needs to be purchased by age age 75 according to the legislation.

Changes in the legislation cannot be ruled out although there are discrimination issues involved.

5.   Benefits will not normally be available until age 55 in future (with some exceptions and a transitional period)

6.   A tax free cash lump sum will be available of at least 25% of the "fund value" but no longer dependent on the retirement income being started at the same time.

There are various important improvements as can be seen.

"clarification" continues to be issued by the Government.