Pension changes – new rules outlined

New pension rules came into effect on 6th April 2015. These give far greater flexibility and options for people with defined contribution pensions who wish to withdraw money from their funds.

The first 25% will be tax free and the person can choose whether to have the 25% tax free element applied to each withdrawal or allocate it to one withdrawal. Other withdrawals will be taxed at the individual’s marginal rate of tax.

There are also changes to annuities so it is important that anyone about to retire seeks impartial advice. A new, Government-backed service, Pension Wise, offers such guidance, which can be given over the telephone using the hotline 030 0330 1001 or face-to-face in a pre-booked appointment. Pension Wise advisers will:

  • Inform consumers of the scope, purpose and limitations of the session;
  • Request information from the consumer about their accumulated pension pots;
  • Request information about the consumer’s financial and personal circumstances;
  • Alert consumers to other sources of information and advice;
  • Identify options relevant to the consumer;
  • Point out tax implications and debt obligations;
  • Set out the next steps for consumers to take;
  • Provide consumers with a record of their guidance session.

More information about Pension Wise and how to register can be found here. 

Payroll Penalties: Beware!

Whilst payroll RTI (real time information) was introduced years ago, as of April 2015, penalties of £100 (minimum) can now be charged if returns are filed late or HMRC does not receive the expected number of returns.

Penalties will not be charged for the first month that the Full Payment Submission (FPS) is submitted late, but in subsequent months, a penalty will be levied. For small employers this is £100, but more for larger employers.

Employers with nine or fewer employees can still take advantage of an exemption for 2015/16, provided they remember to use late reporting code E to claim the exemption.

Employers must also be aware that interest will now be charged on late PAYE payments.