Pension Freedoms

Pension FreedomsFrom April 2015, so long as you are over 55, regardless of the amount you have in your pension pot, you’ll be able to use it in whatever way you want, taxable at your marginal rate tax within that year. 25% of the pension fund will continue to be tax-free and you may gain advantage from improved flexibility. Individuals who still want the protection associated with an annuity remain in a position to acquire one and those that want increased control of their financial situation can drawdown their pension however they want. People who wish for their pension to remain invested and drawdown gradually will also be have the ability to do this. This improved flexibility provides you with excellent control, however, it also brings increased responsibility so taking the time to understand your options and the implications of these options is paramount.

The Pension Planner is perfectly positioned to give our clients a clear idea of not only what options are available to you but what options are most suitable. We ensure that you are in the best position possible to enjoy your retirement, be that now or planning for a date in the future.

Benefits of receiving pension and retirement advice from The Pension Planner

  • An initial meeting completely at our expense with a free analysis of your current retirement / investment provisions.
  • Known cost of advice implementation.
  • Advice from friendly, highly qualified pension/retirement professionals.
  • Ensure you make the most appropriate choices to fit your circumstances.
  • Efficient transactions, we take care of the whole process on your behalf.
  • One point of contact, whilst our team all work together behind the scenes on your behalf.
  • Our service proposition ensures high levels of aftercare ensuring you always have access to advice and guidance.
Once you make contact with us we follow a 4 step process that ensures we quickly identify your pension/retirement position. We do this so that your first consultation with us is as productive as possible. These 4 steps are at our expense giving you the peace of mind that you are not being charged when you do not yet know if we are able to help and add value.

  1. Have an initial telephone conversation to establish what you are looking to achieve and the basis of the advice you are seeking.
  2. We will then send you a short electronic or paper based pension / investment questionnaire so we have an overview of your current situation.
  3. Obtain authority to talk to your pension or investment provider(s) and gather all relevant and up to date details regarding your plan(s).
  4. Arrange and hold an initial meeting to discuss your requirements and options available to you – this is all at our expense.
Pension FreedomsNew pension freedom policies mean people may take lump sums straight from their pension fund, once they are age 55. It is known as taking Uncrystallised Funds Pension Lump Sum (UFPLS). Every time you take an UFPLS, 25% is going to be free of tax, the rest will be taxed as income. For those who have reached 75 with not enough lifetime allowance the tax-free proportion is going to be lower.
Individuals who do not need their entire tax-free cash, nor recurring income via their pension, are now able to take intermittent lump sums as they see fit. There is absolutely no necessity for people to take all their pension in one transaction.

The remainder of the pension remains invested, meaning the residual fund and long term income is not protected. Continuing to have the pension fund invested will create the prospect of growth however taking a series of lump sums is going to reduce what’s left to deliver income later on, especially if the selected investments don’t perform well or if you take an excessive amount out.

There’s no limit on the sum you are able to take via UFPLS, however it is crucial that you plan the length of time your pension is required to last. Deciding if you should take your income gradually instead of in one go is a massive consideration, which could alter how much tax you may pay.

The pension company deducts the tax, where relevant, prior to a withdrawal being paid. Don’t forget in most instances 25% of your UFPLS is going to be free of tax with the balance taxed as income. Any taxable income is going to be combined with another income received within that fiscal year, so taking large withdrawals in one tax year could take someone into the higher income tax bracket.

When you take your first taxable payment from your pension, it’s probable, emergency tax is going to be taken, unless of course your pension provider has a current P45. Emergency tax is going to continue until HMRC give your tax code to your pension provider. More tax could be taken than should have been, then you will have to claim this back from HMRC.

You will find tax benefits in keeping funds inside a pension, as the fund generally remains outside of your estate for IHT calculations.

Should you die prior to your 75th birthday, any funds still in your SIPP are usually paid directly to your beneficiaries, free of tax in certain circumstances. However, death for after 75 all benefits released are going to be taxed as income, this will be based on your beneficiary’s marginal rate in most instances.

Pension Freedoms Take into account any charges you are going to pay. The majority of investments have charges, therefore the growth you get is dependent upon the returns from your investments, less the charges. It is therefore vital you take into account the costs of the pension along with the other options you’re looking at, which includes if you plan to re-invest your pension withdrawal.

The latest pension regulations unfortunately makes people more vulnerable to investment cons. Once cash is taken from a pension, you need to be careful about the places you invest it. Investment frauds exist. These are usually done by firms who are not regulated and red light warnings may include unsolicited calls or texts giving the promise of special or unconventional possibilities providing quick, easy profits or anything that appears to be simply too good.
Taking money out of your pension could decrease any means tested benefits you get.

Withdrawals out of your pension could be counted towards capital or income for your evaluation of means tested benefits. You will find more information about this at www.gov.uk/benefits-calculators.

Creditors may have the ability to call on the money you take from your pension. Anything kept in a pension could be shielded from creditors should you be struggling with debt and they take legal action. As soon as you take you assets from your pension any security may well lost.

This is the new name for drawdown plans that started after 06/05/2015.
These plans adhere to the States Pension Freedoms introduced during the 2014 Budget. As a result they now permit you to make use of your pension however you wish, as long as you are aged 55 or older. The Chancellor spelled out ‘Pensioners are going to have total freedom to take whatever of their pension pot they want, anytime they want’.

Flexi-Access Drawdown can be employed in numerous ways to assist the consumer achieve their own individual objectives. For most chances are it will be more efficient for tax than utilising their pension in the same way as a bank account.

Typical uses of flexi-access drawdown might be:

  • To only use the available tax free element out of your pension plan
  • To maintain the remaining funds invested if you do not require an income
  • To accessibility to funds should an emergency happen
  • To produce additional tax free funds later on
  • To take money out of your pension as tax efficiently as it can be
  • To take greater income than offered by an annuity
  • To take your entire pension in the form of 1 payment or series of payments
  • To minimise future IHT liabilities
  • To ensure that your entire pension fund either goes to you, or loved ones

Simon WoolfallPension Freedoms