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Case study 06.01.2009

Read our case study on income planning to find out how a company director, close to retirement and with little pension provision, can start funding for retirement.

Small Self-Administered Scheme

Benefits before age 75

Pension commencement lump sum

The maximum tax-free lump sum that can be taken is 25% of the fund used to provide pension benefits up to the lifetime allowance. Therefore, the maximum tax-free cash for the five years from 2006/2007 is as follows:

Tax Year	Maximum Tax-free Cash
2006/2007	£375,000
2007/2008	£400,000
2008/2009	£412,500
2009/2010	£437,500
2010/2011	£450,000

Individual members may be entitled to more than this amount if pension fund protection has been granted.

Pension

Any pension taken from the fund will be treated as earned income and will therefore be liable to income tax. Pension income may be taken as listed below.

A scheme pension, paid to the member by the scheme over the member's lifetime.
A lifetime annuity purchased from a life assurance company. The annuity must be payable up to the member's death or the end of any guarantee period should the member die within this period.
An unsecured pension, where the pension is taken from the fund via income withdrawal. The amount of pension that can be drawn down is between 0% and 120% of the amount of annuity that could be provided using the Government Actuary's Department's annuity rate applicable for the member at the time they take benefits. The level of unsecured pension must be reviewed at least every five years.
A short-term annuity purchased from a life assurance company. A short-term annuity is payable for a term of no more than five years and must end before the member reaches age 75.

This information relates to the Rowanmoor Pensions SSAS.