Discussing life expectancy as part of your retirement planning is key

Pension Wise, the government’s guidance guarantee service, must discuss life expectancy as part of people’s retirement planning, according to a recent Aviva report.

Tax rules amended to allow greater innovation

The tax rules will also be amended to allow innovation in retirement products. This is happening in a number of ways:

New system to encourage further pension saving

Currently someone in income drawdown cannot receive tax relief on future contributions. To encourage further pension saving under the new system:

Freedom to pass on an unused defined contribution pension

People with defined contribution pension savings will no longer have to worry about their pension savings being taxed at 55% on death. Commencing from 6 April 2015, individuals will have the freedom to pass on their unused defined contribution pension to any nominated beneficiary when they die, rather than paying the 55% tax charge which currently applies to pensions passed on at death.

Interim rules from 27 March 2014

Unlike a conventional personal pension, which is used to build up a pension fund until a chosen retirement age is reached, income drawdown is used to pay an income once someone decides to retire or semi-retire. The remainder of their fund remains invested, rather than using it to buy an annuity.

Baby boomers are some of the least prepared for retirement

A recent survey has revealed the concerning fact that 40% of baby boomers, those aged 55 to 74, have not started to save specifically for retirement yet, despite two-thirds of respondents understanding the State Pension will not be sufficient.

Accessing your pension safely, without unnecessary costs and a potential tax bill

With the biggest pension reforms in a lifetime rapidly approaching on 6 April, are you ready for how these reforms could potentially affect you, whether now or in the future? The wide media coverage that followed the 2014 Budget announcements talked of pensions in the future being used as bank accounts and new pension freedoms leading to long waiting lists for Lamborghinis.

Why having a target in mind clearly makes a difference to fund this stage of your life

A recently published report has highlighted the positive impact planning and professional financial advice can have on income levels in our retirement. The first Retirement Income Uncovered report from Old Mutual Wealth found that retirees who hadn’t set themselves an income target to aim for in retirement had an average income of £17,500 per year. However, those who saw a financial adviser at least once have an average income in retirement of £20,800.

Making informed decisions about how to best use your savings and manage your income in retirement

More than one in four Britons (27%) expect to come under pressure to lend their family money from unlocked retirement pots when the new pension freedoms are introduced from 6 April this year, according to latest research from the Centre for the Modern Family.

Legally minimising or mitigating taxation on current and future tax liabilities before 6 April 2015

Tax planning is a very complex area covering many forms of tax. No one likes paying more tax than they legally have to, but one of the challenges of wealth is the high taxation it attracts. For some individuals the need for specialist professional advice has never been greater. With the current tax year end rapidly approaching, we’ve provided some tax planning areas for you to consider before 6 April 2015.

Time is running out if you want to make the most of your tax-efficient savings allowance

If you are keen to take advantage of the New Individual Savings Account (NISA) allowance, now increased to £15,000, and make the most of your tax-efficient savings, time is running out. You only have until 5 April to fully utilise your 2014/15 NISA allowance, after which it will be lost forever.

Greater choice and flexibility about how retirees use a
pension pot to fund retirement income

The 2014 Budget announced major changes to the way that members of a defined contribution pension scheme could access their pension savings. In March 2014, the Chancellor George Osborne announced changes to the pension world which would revolutionise the way members of defined contribution schemes could access their pension benefits. These wide-ranging changes move away from individuals being required to purchase an annuity and instead offer a number of different options for drawing their pension benefits.

Taking all of a pension pot as a lump sum

When someone reaches retirement, they can take up to 25% of their pension as a tax-free lump sum (called the ‘pension commencement lump sum’). The remaining 75% has usually been used to purchase an annuity, a financial product that provides them with a guaranteed income for life, or been left invested, allowing them to take a portion of their pension pot each year to provide an income – known as ‘income drawdown’.

10 things about the wide-ranging changes you should know

The pension system is completely being overhauled to enable individuals to take their defined contribution pension how they like in order to create greater choice and flexibility. These changes were announced in Budget 2014. From 6 April 2015, no matter how much an individual decides to take out from their defined contribution pension after retirement, withdrawals from their pension will be treated as income; the amount of tax they will pay on what they withdraw will depend on the amount of other income they have in that year, as long as you are 55 or over. This is instead of being taxed 55% for full withdrawal, as it has been previously.

Taking advantage to legally minimise the tax paid

The main beneficiaries of the pensions freedom reforms are likely to be those who have built up relatively large pension pots, who will be using this freedom to avoid paying 40% tax when they draw it down under the new freedoms.