Taxation of Small Pensions

H M Revenue & Customs (HMRC) will now collect PAYE Income Tax on small pensions of up to £1,500 per annum. Tax will be collected through the PAYE system from 2008/09 onwards and HMRC has agreed to waive any sums due before these dates. In practice automatic collection will happen in 2009/10 with any arrears for 2008/9 collected in 2010/11.

Government to allow protected rights money to be added to other pension pots.

The Government has announced that the DWP intends to amend the current Pensions Bill to abolish the protected rights 'survivor's benefit' rule. This rule currently requires an individual with a spouse or civil partner, at the point of annuitisation, to use any protected rights to purchase a joint life annuity. On death, the survivor becomes entitled to a pension of half the amount the member was getting.

But from 2012 when contracting out is abolished for Defined Contribution schemes, the protected rights pension can be combined with other pensions pots.