A Government amendment to the Finance Bill will make it simpler for savers with pre-A-Day company pensions to transfer to a new scheme and take advantage of new pension freedoms without losing their historic entitlements.
Before A-Day in April 2006, people in company pension schemes were able to have tax-free lump sums of more than 25 per cent of the total value of their pension.
After A-Day, savers who remained in their scheme kept the entitlement to tax-free cash worth more than 25 per cent of the value of the pension.
However, they were only able to move to a new scheme and keep the benefit if an employer wound up their existing scheme and the employee entered a buyout policy which maintained the protection or if they found a “buddy” to move with.
If they did not meet those requirements their tax-free cash entitlement dropped to 25 per cent.
Skandia retirement planning manager Adrian Walker says a Government amendment to this year’s Finance Bill will enable savers to move funds caught in old company based pensions into a new scheme without the need for a buddy as long as they take an income solution before 5 October 2015.
The Finance Bill amendment will only affect people who are 55 before 5 October 2015, with those unaffected left having to meet the buddy system rules.