Based on some of the comments written in the papers, we are led to believe that now is ‘harvest time’ and an opportunity to ‘make hay’ whilst we can. An opportunity to build up a property empire of buy to let’s, to purchase fancy sports cars or even gold…all funded by money from your pensions!!
Of course, the media isn’t regulated and are able to create big headlines and make bold statements with no come back, but there are some truths in their comments.
So, what is the reality and how are people likely to capitalise on the new pension regulations? What are also, the common misconceptions?
The new pension regulations stated in 2014 and reinforced in the 2015 budgets, are hugely significant in changing the way individuals can take benefits from their pensions. In simple terms, the new rules allow individuals aged 55 or over to have full access to their pension savings irrespective of the size of the pension.
So, the good news is that there is more flexibility…the bad news; is that there is more flexibility!
Before withdrawing any money from a pension fund, the potential tax implications must be considered along with the need to ensure that there is sufficient income, well into retirement.
This communication is not intended to dissect the nuances of the new rules but if you would like more detail, simply click the button below and we will send you our guide to the new pension rules.
Personally, I’ve always seen pensions as just another investment, albeit with different rules wrapped around them. Pensions can now be viewed even more like investments, since the ‘straight jacket’ of legislation has been removed.
It sounds too good to be true doesn’t it?
There is no doubt that for many, it is an opportunity to ‘mop up’ lots of small pensions which were going to pay out a ‘diddly squat’ income in retirement. This is where I can see the holiday and car companies being busy in a similar way to when the PPI compensation fuelled a mini sales boom.
The problem is, will your provider be ready for the new rules and will they allow you to take benefits in the way you want?
Comprehensive financial planning
When undertaking more sophisticated planning, the new freedoms give us another tool to use in helping plan someone’s future; firstly to provide security and then excitement, about what’s possible.
We have already planned some early retirements using the greater flexibility. In fact, only this week we were able to demonstrate to one of our clients, a senior executive, that the new rules had landed in his lap and that he is able to retire 8 years earlier than he ever thought possible.
What are the misconceptions?
- That all the money from a pension is tax free.
- Regardless of the provider, you will be able to access all your money.
Even those who are fully conversant with the rules and the tax implications can still be fully committed to extracting all their money out of pensions, regardless. We were approached recently by someone who wanted to take all the money out of their sizeable pension pot to build his own house. Sure, 25% of the money will be tax free but because of his salary, the resultant tax on the residual 75% was likely to attract 45% tax.
We demonstrated ways in which he could still have his dream home, yet significantly reduce the tax he would pay on withdrawals from his pension by looking at the wider picture.
Comprehensive planning is the key for those with larger pensions.
If you need help in planning your future contact either Gary Neild or Martin Reed at:
As many of you are aware, we recently held our Charity Concert in aid of Pink Champagne, a local charity offering support to those women recovering from breast cancer and also a financial education programme for young people, to be delivered by Daniel Britton at the Personal Finance Academy.
In my next blog I will thank all those who helped to make the event such a huge success. I will also announce the final total raised as a result of the 350 people attending, the silent auction for a Hideaways Club villa and the generous pledges that have been offered. There is still time to support these good causes if you feel so inclined.
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