Pensions – the best of both worlds…

A new window of opportunity now exists for clients in outdated pension contracts to transfer to new arrangements that will enable them to benefit from next years planned changes to pensions rules but importantly whilst retaining any entitlement they may have to enhanced tax free cash in excess of 25% of fund value.

Many members of Executive Pension Plans (EPPs) and Section 32 “buy out” contracts retain entitlements to tax-free cash in excess of 25%. Many of these contracts will not offer the necessary flexibility to take advantage of the Governments planned new pension rules which are scheduled to come into force in April 2015. Previously transferring from these plans would have resulted in the loss of any enhanced tax free cash entitlement.

New rules mean that (subject to a range of conditions) clients who wish to take their tax free cash entitlement in the near future are able to transfer out of these outdated contracts into new flexible ones while maintaining their enhanced tax free cash entitlement.

In order to preserve the entitlement to tax-free cash of more than 25% any transfer must satisfy the following conditions:

  • Clients must be at retirement age 55 or older;
  • Transfer all their rights from their old pension in one go;
  • Transfer must happen before 6 April 2015;
  • All of the tax-free cash to which clients are entitled under the new pension plan must be taken before 6 October 2015.

Clients should seek advice and be aware of all of the implications of any transfer. Taking their entire tax-free cash entitlement will “crystallise” the remaining pension fund even if no income is taken from it immediately. This has tax implications for lump sum death benefits.

This is an opportunity from which a number of clients will benefit. It is important that anyone who could benefit from this opportunity takes advice as soon as possible as transfers from outdated pensions can take up to 6 months to complete.


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