THE word "pensions" has been something of a turn-off for many years now, writes Michael Proudfoot a director of the Kendal office of Lonsdale & Partners chartered accountants, in his latest monthly article for Business Gazette.

Poor performance, high charges and mind-boggling complexity have won the pensions industry few friends yet we all need to save for retirement somehow.

The Government has tried to bring charges down with the introduction of stakeholder pensions, and now is trying to simplify the rules.

Most of us get a sinking feeling when the Government announces "simplification" of the tax rules, as it usually means replacing one set of complicated rules with another.

In the case of pensions, however, there is not just one set of rules, but eight, each applying to a different type of pension scheme. The Government now intends to sweep away all of these different schemes and replace them with one set of rules.

It is an ambitious project, and one which will not come into effect until April 2005 at the earliest. But it is not too early to start planning for it, particularly if you are self-employed or run your own company.

There are two main planks to the new rules. The first is that your pension fund will not be able to exceed 1.4 million.

If it does, tax will be charged at around 33 per cent of the excess, in addition to the normal income tax charge when the pension is paid.

The second is that your annual contribution to the scheme may not be more than 100 per cent of your earnings, with a maximum limit of 200,000. As now, contributions of 3,600 a year will be allowed regardless of earnings.

These limits are fairly generous: the most that anyone in a personal pension may contribute in a year under current limits is around 40,000.

But if you have recently incorporated your business and are drawing money by way of dividends rather than salary to save national insurance, you may need to revisit your pension planning.

Until now, it has been possible to take a high salary every six years to support high pension contributions, and revert to a low salary for the other five years, to save NIC. But under the new rules, each year must be looked at on its own.

Directors who are planning to take a large tax-free lump sum from an executive pension scheme may also get a nasty shock if they do not plan ahead.

Previously, it has sometimes been possible for directors to take virtually all of their pension fund by way of a tax-free lump sum, but under the new rules, they will be limited to taking 25 per cent of the fund in this way.

However, it is intended that directors will be able to elect to keep the old rules in place. If you are in this position, consideration ought to be given to topping up the fund before April 2005, to make the most of the old rules while they last.

The final major change relates to the minimum age you can take a personal pension. At present, the earliest age is 50, but from 2010, the Government proposes to increase this to 55.

These are major changes and, at present, the details have not been finalised. But if you take retirement planning seriously, now is the time to start considering your options.