Budget changes put spotlight on pension advice
PENSION savers will have an even greater need of quality financial advice following the latest reforms signalled in George Osborne’s Budget, writes DWIFA director Nick Beal.
The Chancellor confirmed plans to create a second-hand annuity market. This will allow those who have already cashed in a pension the option to swap their regular annuity income for either a cash lump sum or an alternative drawdown pension.
Previous reforms already give these freedoms to new retirees from this month onwards, allowing virtually complete flexibility over how you can draw on a pension fund.
Taken together these changes give pension savers a free hand over structuring income from a pension fund, for example making it easier to retire gradually, taking some pension to supplement reduced salary. Savers can also now potentially pass on more of their pension wealth tax free.
Professional advice is essential in helping savers make the most of these opportunities. David Williams IFA Chartered Financial Planners is Northamptonshire’s biggest independent adviser, with deep expertise in pension planning. The firm is already helping business owners and managers to harness the new reforms to their advantage.
Other Budget changes were less welcome. The Chancellor wants to cut the maximum lifetime allowance of each person’s total pensions (excluding state pension) from £1.25m to £1m. Pension pots worth above this limit can be taxed at up to 55%.
This change is planned to take effect from April 2016. The cut means savers with funds already worth more than £1m will need to register to protect their current entitlement. Others, who are below the limit but have the potential to see funds grow above the £1m mark before they retire, will need to review their ongoing contributions and investment strategy.
Again this is where quality advice from a Chartered Financial Planning firm can help a saver avoid unnecessary tax, and identify alternative investments if their pension saving is now capped.
Elsewhere in the Budget, the Chancellor gave a boost for savers. He announced plans to exempt the first £1000 of interest earned on cash savings from tax for basic rate taxpayers. Those paying at 40% will get the first £500 of savings income tax free.
For a free initial discussion on how the Budget impacts on your finances and how you can exploit all the new pension opportunities, please contact David Williams IFA on 01604 621302 or via our contacts page.