Deciding what to do with your pension savings is an important step, and now you’ll have even more choices to consider. Under new reforms which are to be introduced from April 6, savers aged over 55 will be able to access their entire pension pots and spend the money as they choose. Historically, the amount older savers could access each year was restricted.
Who will the changes apply to?
The changes apply to people over 55 with a ‘defined contribution’ or ‘money purchase’ pension schemes, which take contributions from both employer and employee and invest them to provide a pot of money at retirement. It won’t apply to those with ‘final salary’ pensions which provide a guaranteed income after retirement.
What are my options from April 6?
1. Withdraw your funds
2. Take some money, as and when you need it
3. Use it to provide yourself with an income
4. Leave it where it is
How else could it affect me?
Savers won’t be limited to one chance to take a single tax-free lump sum worth 25 per cent of their pension pots instead they will be able to dip in and make as many withdrawals as they want, each time getting 25 per cent tax-free and the rest taxed like income.
There is also an improvement to the tax treatment of pensions on death and an opportunity to pass pension wealth on within the family, tax-free in some circumstances.
While the new rules create unprecedented pension freedom, there could be temptation to withdraw and spend saved cash. People could underestimate their potential longevity and will run out of money before they die.
At WHN we offer truly independent and impartial financial advice and our experts will take the time to find out what you’re looking for and what you want to achieve.
For further information, contact Brian Ollerton on 01706 213356 or email brian.ollerton@whnsolicitors.co.uk
