The Government has last week released the draft of the proposed changes to pensions law to be introduced from 6th April 2011.

The changes are:

• There will be no restriction of pension tax relief for additional rate tax payers
• The Lifetime Allowance will be reduced from £1,800,000 to £1,500,000.
• The Annual Allowance is reduced from £255,000 to £50,000
• It is now possible to carry forward unused Annual Allowance for up to three years
• It will no longer be possible to exceed the Annual Allowance tax-efficiently in the year pension benefits are crystallised, other than by using the new carry forward reliefs

As well as implementing the above, the new draft legislation also introduces the following changes:

• The effective requirement to annuitise by age 77 (previously 75) will be removed
• Maximum income in drawdown will be 100% GAD (Government Tables) regardless of age
• If someone certifies they have a remaining guaranteed lifetime pension income of at least £20,000 per annum (including state pension benefits), there will be no cap on pension withdrawals
• Pension Commencement Lump Sum can be taken at any age after normal retirement ageand no longer has to be taken by age 75
• The link to lifetime allowance for trivial commutation is broken, so those with total pensions of no more than £18,000 will still be able to treat them as trivial
• The link to lifetime allowance for protected tax free cash is also broken, removing the worry that  someone with protected tax free cash would find the protected amount was reduced on 6th April 2012
• 55% total tax on lump sum death benefits regardless of age
• Provided the pension scheme trustees have discretion on where to pay the benefits, there will be no Inheritance Tax on pension lump sum death benefits regardless of whether or not the pensioner deliberately increased the value of his estate by not taking benefits
• The Annual Allowance charge will now be linked to the individual’s marginal tax rate rather than a flat 40% .