Budget Update - March 2015

01 Mar 2015

You may have read about changes that are happening to pensions from April this year. These changes will affect people with defined contribution (or “DC”) pension savings, as you may remember from the News Article we published last July.

How this affects AA Pension Scheme Members

As noted in the last article, because the AA Pension Scheme is a defined benefit (or “DB”) pension scheme, these new flexible options will not generally apply to members. If you have left the Scheme it will be possible to transfer your benefits to a DC pension scheme, but members will need to show that they have taken independent financial advice for transfers of £30,000 or more.

If you have other pension benefits

It is, however, possible that you have other pension savings. If this is the case, it is important that you understand how taking other pensions can affect your ability to pay into the Scheme.

If you have a DC pension and you decide to take one of the new flexible retirement options, your Annual Allowance* may reduce to £10,000 for future DC pension savings, including Scheme AVCs. This would mean a large reduction in the amount you can pay without having to pay a tax penalty. Your Annual Allowance for building up DB benefits will also reduce to £30,000.

What should you do?

If you do have other pension schemes which you are considering taking money out of, it is important that you talk to your provider to understand if any of the above affects you.

If you are affected then it is up to you to make sure that you don’t go over your Annual Allowance.. If you think this could be an issue for you, it is a good idea to speak to an Independent Financial Advisor. If you don’t have your own adviser you can find one local to you at www.unbiased.co.uk.

*In October last year, we published an article about the Annual and Lifetime Allowances and how they might affect you, particularly if you pay AVCs. The current Annual Allowance is £40,000.