In amongst the technical papers issued by HM Revenue & Customs (HMRC) on the back of the Budget 2012 changes, Skandia has discovered a hidden gem. An alteration in the formula for calculating tax-free cash for pre 6 April 2006 (A-Day) members of occupational pension schemes could lead to people receiving more tax-free cash when they retire.<\/p>\n
Occupational pension scheme legislation <\/strong> Pre A-Day members of occupational pension schemes have been allowed, under HMRC rules, to protect the tax-free cash rights they held at A-Day that were greater than 25 per cent. In such cases the tax-free cash entitlement can further increase over time, based on two calculations introduced by HMRC:<\/p>\n 1. The A-Day protected tax free cash entitlement is automatically increased by the increase in the Lifetime Allowance up to 6 April 2012, an increase of 20 per cent. All members with protected tax-free cash receive this uplift regardless of how well their occupational scheme investment has done since A-Day.<\/p>\n 2. The tax-free cash entitlement is further increased by 25 per cent of any positive growth in the value of the pension fund since A-day.<\/p>\n Discounted investment growth <\/strong> Please note: this improvement does not apply for those who have applied for fixed protection. Their revaluation of A-Day cash is still on the pre 6 April 2012 basis which subtracts the A-Day fund value increased by 20 per cent from the current fund value to determine whether there is any additional tax free cash entitlement.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" Good news for some occupational pension scheme members In amongst the technical papers issued by HM Revenue & Customs (HMRC) on the back of the Budget 2012 changes, Skandia has discovered a hidden gem. An alteration in the formula for calculating tax-free cash for pre 6 April 2006 (A-Day) members of occupational pension schemes could… Read more »<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/www.suretyfp.com\/wordpress\/index.php?rest_route=\/wp\/v2\/posts\/1619"}],"collection":[{"href":"https:\/\/www.suretyfp.com\/wordpress\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.suretyfp.com\/wordpress\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.suretyfp.com\/wordpress\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.suretyfp.com\/wordpress\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1619"}],"version-history":[{"count":0,"href":"https:\/\/www.suretyfp.com\/wordpress\/index.php?rest_route=\/wp\/v2\/posts\/1619\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.suretyfp.com\/wordpress\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1619"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.suretyfp.com\/wordpress\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1619"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.suretyfp.com\/wordpress\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1619"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nPrior to A-Day, occupational pension scheme legislation determined the level of tax free cash available to members of such schemes. Since A-Day, the level of tax-free cash has been set at a maximum of 25 per cent.<\/p>\n
\nPrior to 6 April 2012, the level of investment growth was discounted by 20 per cent of the pre A-day fund value to take account of the increase in Lifetime Allowance from \u00a31.5m to \u00a31.8m up to 6 April 2012. From 6 April 2012, this discount no longer applies, resulting in a higher tax-free cash allowance for many people, provided they have seen positive investment performance since April 2006.
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\nGood news for many people<\/strong>
\nThis is really good news for many people who have a protected tax-free cash entitlement in an occupational pension scheme they joined prior to 6 April 2006. The new calculation can greatly enhance the amount of tax-free cash these people can take at retirement.
\nMany people may not know whether they have a protected cash entitlement from their service up to A-Day in these schemes, so it is essential to check with those schemes to establish what their tax-free cash entitlement was at A-Day.<\/p>\n