This year’s budget brought dramatic changes to the pension industry, many of which had been long called for by those approaching retirement.
The new rules due to start in April 2015 means that limits to how much you can draw from your pension are removed. The first 25% of most pensions is still available to be taken as a tax-free cash lump sum, you will then be able to take the remainder as a lump sum too if you wish; though, it will be taxable as income in the same way that you get taxed on your earnings. In our opintion the area of taxation is often glossed over by mainstream press headlines-if you are not careful you could end up with a very large unnecessary tax bill. For this reason it would be best to speak to a Financial Adviser to help you plan how to take your pension taking into account the many other factors that could affect your decision.
A further area to take into account is the fact that if you were to take a large portion of your pension fund as income or tax free cash (or both) you are likely to limit the amount of further contributions into a pension in the future, for a lot of people this would not be an issue but if you were to take your benefits at age 55 then look to make large contributions in the future you might find that you are unable to do so and lose out on a significant tax advantage.
Lastly death benefits have been drastically improved with extra post budget announcements. This is another areas we can explain to you in detail.
After years of largely negative press surrounding pensions, retirement planning and Pensions specifically, seem to be enjoying favourable press comments! In our opinion this is long overdue and very welcome.
Since the recent budget changes (alluded to above) as well as further more recent changes surrounding the treatment of pensions on death, the tax treatment of pensins has never been this good.
However, the even greater array of choices available to those retiring does mean that taking advice whilst planning for retirement and also at the point you decide to take income has never been more important.
Taking the time to seek advice as to which investments are held within your pension plan, could mean thousands of pounds difference when you do come to retire. Too few people realise the relevance of this point and this is a key area where we provide value for our clients and ultimately help to make a real difference to their future.
Here are a few questions a prudent Retirement Planner should ask:
- How is my pension plan performing?
- Has my pension plan fallen by more then the UK/International equity markets?
- Exactly what are the level of charges levied on my pension plan?
- What size is my fund likely to be at my chosen retirement age?
- Would I be better off using externally managed funds as the investment vehicle within my pension plan? What are the advantages and disadvantages for my situation?
- Am I fully utilising all available tax breaks via my pension plans?
- How has the recent budget affected my plans for retirement.
Claire is one of the few advisers in the Portsmouth area with the Chartered adviser status and also holding the pension transfer permission with the FCA (which allows us to provide advice on occupational pension transfers in addition to personal pension transfers).