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Plan design

The Finance Act 2004 and Pensions Act 2004 introduce a radically different regime for the provision of tax-favoured pensions. What does this mean for employers and for trustees of occupational pension schemes: what is the minimum approach; what new options do the changes provide; what longer-term possibilities might there be?

The new tax regime comes into effect from 6 April 2006. This does not leave very much time to decide on what to do. There are many issues that must be addressed. High earners have a totally new set of rules to plan for, and for all other employees a wealth of opportunities are opened up for efficient pension provision.

This section sets out our understanding of the provisions of the Finance Act and some of the Pensions Act to help employers and trustees consider the issues. The summaries provided cannot contain all the detail, and it is therefore recommended that you take specific legal and actuarial advice.

The different sections included are:

AVCs

This document sets out plan design implications of the new pensions framework on AVCs.
Read the full fact sheet
Version: 3
Date: May 2006

DC design issues

This document sets out plan design implications of the new pensions framework on DC design issues.
Read the full fact sheet
Version: 4
Date: May 2006

Death benefits

This document sets out plan design implications of the new pensions framework on death benefits.
Read the full fact sheet
Version: 4
Date: May 2006

The Earnings Cap/Revenue limits

This document highlights some of the issues for plan design following the removal of the Earnings Cap and other Inland Revenue limits under the new pensions framework.
Read the full fact sheet
Version: 4
Date: May 2006

Equal treatment

In this time of changing pensions legislation, several other issues, that schemes will need to consider, are waiting in the wings. These relate to the equal treatment of employees and have pension scheme ramifications.

The Civil Partnership Act 2004 will require schemes to align the provision of death benefits to a registered same-sex partner with those for a surviving spouse. The Government also has to implement legislation to combat age discrimination by 1 October 2006, although exactly what this will mean for schemes remains to be seen. Thereafter, measures, arising from the European Commission, raise the prospect of schemes having to use 'unisex' annuity rates and the treatment of workers employed through an 'agency' on a basis no less favourable than that applying to other employees.
Read the full fact sheet
Version: 4
Date: May 2006

Flexible retirement

This document sets out plan design implications of the new pensions framework on flexible retirement.
Read the full fact sheet
Version: 4
Date: May 2006

International implications

This document sets out the implications of the new pensions framework in relation to international employees.
Read the full fact sheet
Version: 4
Date: May 2006

LTA issues

This document sets out plan design implications of the new pensions framework on LTA issues.
Read the full fact sheet
Version: 3
Date: May 2006

Other legislation

Besides the Pensions Act 2004 and the Finance Act 2004, pension plan design will be affected by other legislation. This document highlights some of these implications.
Read the full fact sheet
Version: 4
Date: May 2006

Tax-free lump sums on retirement

This document sets out plan design implications of the new pensions framework on tax-free lump sums on retirement.
Read the full fact sheet
Version: 5
Date: May 2006

This note gives a broad outline of the provisions. Action should not be taken on the basis of the information provided without seeking specific advice. Please note that some provisions may be amended in the Finance Act 2005.

Authorised and regulated by the Financial Services Authority.