From April next year, we will see more freedom in ways people can take their pension benefits when they reach 55, but what do the changes mean if you are planning your retirement?
More freedom in how you draw your income: The flexibility will allow you to treat your pension fund in the same way as any other investment: you will be able to take withdrawals whenever you want.
From April 2015, if you are a member of a defined contribution pension scheme and aged 55 or over, you will be able to draw money from it as you see fit. You can receive a tax free cash sum of up to 25% of the amount you take, and then you will have the freedom to access some or the entire remaining fund as income, taxable at your rate of income tax. So if you want to access all of the money from your pension, you will be able to take it as a lump sum.
Although the new pension freedoms mean you will no longer be compelled to buy an annuity, if you are looking to secure a guaranteed income for the rest of your life, an annuity will still be an appropriate option for you.
Taxation on death to be reviewed: The tax position on death under the current rules is that a lump sum payment from any money remaining in drawdown is subject to a death tax charge of 55%. The same tax rate also applies to any remaining pension fund not being used to provide benefits, if the death occurs from age 75 onwards.
With these changes quality face to face advice is more needed now than ever! To receive a complimentary guide covering Wealth Management, Retirement Planning or Inheritance Tax planning, contact Simon Hoadley Wealth Management on 01323 431938.