Pension tax simplification
Pension tax simplification, often simply referred to as "pension simplification" and taking effect from A-day on 6 April 2006 was a policy announced in 2004 by the Labour government to rationalise the British tax system as applied to pension schemes. The aim was to reduce the complicated patchwork of legislation built-up by successive administrations which were seen as acting as a barrier to the public when considering retirement planning. The government wanted to encourage retirement provision by simplifying the previous eight tax regimes into one single regime for all individual and occupational pensions. Main changes . Broadly the new regime allows considerable freedom in the tax relievable contributions that may be made to pension schemes and the assets in which they may be invested. It also, however, caps the size of tax-favoured pension funds that may be accumulated by an individual. This 'lifetime allowance' was set at £1.6M for 2007–08. Funds accumulated in excess of the lifetime allowance are subject to a tax charge of 55%. Transitional protection provisions were made for individuals who had already accumulated pension funds in excess of this amount. The annual allowance for each tax year was set  at: 2007–2008: £225,000 2008–2009: £235,000 2009–2010: £245,000 2010–2011: £255,000 2011–2012: £50,000 2012–2013: £50,000 2013–2014: £50,000 2014–2022: £40,000 Tax Year - Lifetime Allowance 2006/07 £1,500,000 2007/08 £1,600,000 2008/09 £1,650,000 2009/10 £1,750,000 2010/11 £1,800,000 2011/12 £1,800,000 2012/13 £1,500.000 2013/14 £1,500.000 2014/15 £1,250,000 2015/16 £1,250,000 2016/17 £1,000,000 2017/18 £1,000,000 2018/19 £1,030,000 2019/20 £1,055,000 2020/21 £1,073,100 In addition to the above changes, employees aged 50 or over can withdraw up to 25% of each of their pension funds as a tax–free  lump sum when it comes into payment, whether or not they continue to work. The age at which a pension can begin to be paid was increased to 55 on 6 April 2010. Member-directed pension schemes. A-Day introduced changes for the two types of member-directed pension scheme, SIPP and SSAS. These two different arrangements were largely brought into line with each other, with the following exceptions: