Standard Life PBR response - More tax free cash for defined benefit members

A-Day introduced a standard tax-free lump sum entitlement of 25% of the individual's pension benefits.

Those members who were entitled to a lump sum larger than 25% could protect this higher amount.

If this happens, members can also receive an additional 25% of any money built up after A-Day in addition to their protected amount.

This rule is complex to operate for members of defined benefit schemes as there is no specific fund for each individual member.

This leads to mistakes in the amount being paid out - often to lower paid workers.

So the Government has decided to simplify the calculation, and this means people will no longer need to have built up benefits after A-day in order to receive an additional tax-free lump sum.

There is an estimated 16 million active and deferred members of private sector defined benefit schemes.

Andrew Tully, Marketing Technical Manager at Standard Life said: 'This change will allow many members of final salary pension schemes - especially those who left before A-Day - to take more of their benefits as a lump sum.

The simple pension rules have already become too complicated.

This minor easement is a small step in the right direction to true simplification.' If you would like to discuss this in more detail please contact: John Lawson, Head of Pension Policy, 0131 245 7548 Andrew Tully, Marketing Technical Manager, 0131 245 4051 Paul Keeble, PR Manager, 020 7872 448109 October 2007.

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