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What goes around comes around - or does it?

Category Technical Articles
AuthorTechnical Department
Article by Andrew Hubbard, Director of Tax with Tenon Group. This article appeared in the September 20006 issue of Tax Adviser. The author is 50 this year. What significance does this have in the new pensions world? Plenty, because under the new rules he can if he wishes take his tax-free lump sum from his pension scheme but still carry on working. In the new world of simplified pensions we cannot of course use a complicated expression such as 'tax-free lump sum': we can now use the much more straightforward term 'pension-commencement lump sum'.

If the ability to take this lump sum at 50 without retiring is one of the key features of the new regime, the other is the severing of the link between earnings and pension contributions. Individual contributions are not capped at the lower of 100% of annual salary and the annual allowance (£215,000 for 2006/07). What is the combined effect of these two changes?

Technical Department
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