In April 2015, at the start of the new tax year, the most radical pension changes for many years came into force.
If you are over 55 (or are approaching age 55), you have a lot more to think about, but even if you aren’t, it’s worth taking time to review your retirement plans, as pensions get a whole lot more flexible in a number of ways.
To summarise, from age 55, you’ll be able to:
Take out up to 25% tax free and then use some or all of your pension to buy an income for life if you want to
Drawdown any amount you like, over any period of time; Take out one or a series of lump sums however you like, with 25% of each being tax free
Pass on your pension pot if you die in much more tax efficient way.
With this flexibility comes responsibility and you need to be aware of the pitfalls:
Only 25% of your fund is tax free any additional payments can be subject to tax at up to 45%
To be able to pass on your pension fund tax efficiently after your death you need to make sure that the right nominations are made whilst you are still alive, failure to plan could mean that your beneficiaries pay more tax.
Although the freedom to use your pension pot without restriction can be seen as good news you need to make sure that you accumulate and utilise your fund carefully to last throughout retirement, after all we are all living longer!
Making the right choices will depend entirely on your personal circumstances, your retirement goals and your needs. You’ll want to get the most from the new pension freedoms, but at the same time you need to get through retirement comfortably without running out of money. You also need to think about the tax implications of any choice. As always it is important to remember that the value of an investment and the income from it can go down as well as up.
Need help? Want further information?
The new rules are complex and it is important to understand the implications of any action you take. Our pension advisers at Fairhurst Financial Planning Limited can assist you in making the right decisions but will also be happy to give you a full retirement review to make sure your current pension is 2015 ready.
Call Mark Hilton now on 01942 241103 to discuss your own pension arrangements,
