The new Pension Freedom rules, which will be taking effect from 6th April 2015, are now almost upon us and have created greatly increased interest in pensions – which are only set to grow throughout 2015.
The key impact of the rule changes is that people will now be able to take 100% of their pension funds from the age of 55. That said, in many cases there will be disadvantages within this new set up — including potential tax burdens and loss of future pension tax benefits. That is the current 25% tax free lump sum, plus the option to flexibly draw out the remaining 75% as part of taxed income.
This means people will be able to drawdown their pension funds in whichever way suits their lifestyles and circumstances, from the age of 55. Consequently people will also no longer need to make decisions to take inflexible annuities or limited drawdown arrangements at retirement. Although in some cases taking an annuity may still be the right solution, depending on personal circumstances. This puts more responsibility on individuals to attempt to make their pension funds last as long as possible. Of course there will also be people who decide to take all their pensions funds immediately (and pay any tax due) for luxuries such as buying a new car, having a holiday, or to manage current finances by paying off debts etc.
One implication of these changes are that people approaching retirement will be encouraged to obtain “guidance” on their options from the Pension Advice Service and Citizen Advice Bureaus. In many cases this will stimulate them to seek “at retirement” pension advice from an IFA — a service Profile Financial Solutions will be offering for pension pots as low as £10,000.
People right up to retirement, no matter their age, will be eligible for Profile’s free, no obligation pension reviews — provided they don’t want to take their entire pension fund within 5 years.
For further information on referring clients to Profile for a free pension review, contact Steve Naylor at steve.naylor@profilefs.co.uk.
