You Are In The Driving Seat - Advice From A Derby Financial Adviser

You Are In The Driving Seat - Advice From A Derby Financial Adviser

When it comes to pensions, the changes introduced in this year's budget are some of the most radical and progressive I have ever seen. Pensions are undoubtedly now more attractive than ever before. Here I will focus on two of the highlights which caught my eye:

Taking money out when you retire

From April 2015, it is proposed that investors will be able to take the whole of their pension pot as a lump sum if they wish. The first 25% is tax free and the rest taxed as income. This option is available right now if a pensioner has a secure pension income of over £12,000 pa (which is a reduction from the previous requirement of £20,000 pa).

There has always been a disparity between pension income, which is usually fixed, and the reality that after an initial spending surge post retirement, regular spending usually then decreases with age, with a possible final 'spike' to meet long term care costs. This budget change finally puts investors in the driving seat when it comes to their savings, allowing them the flexibility to manage expenditure so they can plan for these changes in spending patterns. This should mean they are better able to take advantage of tax planning opportunities and, more importantly, to enjoy their retirement, whether that includes travelling, buying a holiday home or just getting out and enjoying time with friends and family.

Pension income

For those who take a regular pension income from their pot (or are about to start) there is also good news: the annual income limit has increased by 25%, effective immediately.

This means there will be more flexibility in the amount of income pensioners can draw, although it will still remain taxable. This is a welcome development for many of our clients throughout Derbyshire.

For those already taking pension income drawdown, the change is effective from the next income review date although most pension providers allow this to be brought forward on request.

Our reaction

This budget has brought some of the most dramatic changes I have seen and makes the whole topic of pension savings much more interesting and attractive.

As always, it is important to take your whole situation into account and take independent financial advice before taking any action. As a common layman, you may not fully understand the implications of the new laws. So it would be better if you can consult an expert on the matter to know how these new changes may affect you.