The current pension regime arrived on 6 April 2012 and is deemed to be the greatest reform of the pension tax regime since the implementation of the earnings cap in the Finance Act 1989.
Main points of the Pensions 2012 bill:
Replace the current, complex state pension system with a new single tier pension which is currently estimated to be set at around £140 per week, so that those of working age can save for their retirement with confidence.
Increase in the state pension age to 67 between 2026 and 2028.
Commitment ensuring the state pension age is increased in future to take into account increases in longevity.
The journey of the changes to the retirement benefits rules are detailed below. An awareness of these historic changes is important due to the number of updates since 2004.
Finance Act 2004
The regime governing the growth and pay out of retirement benefits was simplified. The start date of the revised regime was 6 April 2006, revolutionising the rules surrounding retirement benefits, with a view to making the retirement benefit rules easier to understand
Finance Act 2007
Legislation was updated which primarily focused on revising the rules for Alternatively Secure Pensions (currently known as Income Drawdown) and withdrawal of tax relief for individual pension term assurance contracts.
Finance Act 2009
A special annual allowance was introduced in this act which limited higher rate tax relief for those with gross earnings over £150,000; this limit was subsequently reduced in December 2009 to £130,000.
Finance Act 2010
Following the post-election budget the special annual allowance of £130,000 was scrapped and a revised reduced annual allowance was introduced to everyone saving for retirement. The annual allowance was reduced to £50,000 as from 6 April 2011.
Finance Act 2011
In addition to the annual allowance reducing to £50,000 the following legislation was also introduced
Capped drawdown rules amended
Treatment of retirement benefits after age 75
Changes to state pension age
Requirement for employers to auto enrol employees in an eligible pension scheme and make contributions