Tax Free Cash considerations

We came across this really interesting article from Standard Life regarding clients who have enhanced tax free cash from A-Day and have not applied for fixed protection:

Clients with protected lump sums above 25% of their pension funds could boost their tax free cash by up to 5% of the A-Day fund by waiting until after 5 April to take benefits.

This is because, from 6 April, 25% of any growth in the fund since A-Day can be paid tax free (not just growth above 120% of the A-Day fund). This is on top of the protected A-Day lump sum increased by 20%.

But this will NOT apply to those who have elected for fixed protection.

George is about to retire with a £600k SIPP. He has a protected lump sum and won’t be registering for fixed protection. On 5 April 2006, George’s fund value was £480k and his protected lump sum was £200k.

If he takes his benefits BEFORE 6 April 2012, his tax free cash will be £246k.
But if he waits until AFTER 6 April 2012, he gets £24k more!

We think this is a really useful opportunity to be aware of. The full article and further detail can be found on the Adviserzone website by following this link

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