Retirement is often said to be ‘the longest holiday of your life’. I don’t know about you, but when I go on holiday I like it to be a bit more special than the usual daily grind – so I know that holiday time is going to be a bit more expensive than day-to-day living.
Taking this a step further, it is also going to mean that retirement is going to be a bit more expensive than when we are working. All this means that it is very important to put some money aside now in order to have sufficient cash and income after we retire.
In his March Budget, the Chancellor announced some sweeping changes to the rules on how pensions can be used at retirement, giving investors far more flexibility, and making pension planning much more attractive than ever before.
The key changes
Changes from 27 March 2014 to defined contribution (DC) pension pots:
•Income drawdown maximum income increases to 150% of GAD tables (from 120%).
•More people will have access to flexible drawdown where withdrawals are unlimited. Currently people can only access this if they have £20,000 ‘secure’ income – that requirement falls to £12,000.
•More people with small pension pots will be able to take them as a cash lump sum (25% tax free the remainder taxed as income).
•Under triviality the main limit increases from £18,000 to £30,000 where people value all benefits they have across all contracts.
•The size of a small pension pot that people can take as a lump sum under triviality has been increased from £2,000 to £10,000 regardless of total pension wealth, with people being able to cash in up to three pots (previously two).
Changes from April 2015:
•People will have complete flexibility, once they reach age 55, to take their benefits when and how they see fit. 25% will be tax-free with the remainder being taxed at the individual’s highest marginal rate.
What does it all mean?
People now have much more flexibility on how they draw their retirement income and will need tax planning as to how and when to take their benefits. While taking it all in one go may sound appealing on an emotional level, this means they are likely to pay more tax than taking it gradually, as and when needed.
It is therefore more important than ever to engage an Independent Financial Adviser to work out the best strategy for taking your retirement income.
Opus Wealth Management Ltd helps successful individuals to plan their futures. We specialise in retirement and investment planning, and in Inheritance Tax planning. We have significant expertise in Pension Drawdown – if you are about to start drawing your pension, get in touch with us now.
Opus Wealth Management Ltd is one of the most qualified firms of Independent Financial Advisers on the Fylde Coast. These are areas in which we specialise, and where we can help.
We are happy to arrange an initial meeting, at our cost, to examine ways we could help you.
Simply ring 01253 595959 or email info@opuswealth.co.uk. You can find out more about us and read testimonials from some of our clients on our website www.opuswealth.co.uk
