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Retire to a safe distance
When you retire, you may be entitled to a tax-free lump sum from your pension scheme. If you have a personal pension plan, you don't actually have to retire - you just have to be the right age to cash it in. If you are an employee in an employer's scheme, the law requires you to retire if you are to receive your benefits.
A recent case highlighted the harshness of this rule. An individual worked full-time as an executive director of a company. He decided to take early retirement, but continued to offer his services as a non-executive director, and was not even paid for his pains. He took his pension benefits, and the Revenue argued that this was not allowed by the tax rules.
The Court of Appeal agreed with the Revenue. Although you can take a different job, you do have to retire from the one which has earned you the pension. The argument that being an unpaid NED is a different job from a full-time executive post did not succeed - the individual was still a director of the same company, and that was not allowed.
This seems to be a bad law - it means that the experience of the retiring individual can't be retained on the Board. It's possible to stay on as a "consultant", but that doesn't have quite the same power to steer the company in the right direction.
If you are thinking of taking benefits from your company pension scheme, we can advise you on what's allowed and what isn't.
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The case is Venables & Others v Hornby. The Special Commissioner and High Court had held that the change in Mr Venables' duties could constitute "retirement", but the Court of Appeal disagreed, and held that he could not be an employee (which, for this purpose, includes office-holders such as directors) of the same company.
This item was included in the web version of the Spring Newsletter, but has been repeated because it did not find space in the printed version and is important.
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