This year around 320,000 people will reach 55 and will benefit from more choices on how they draw, invest and spend their pension. We speak to Matt Begley, retirement planning expert at Harris Begley.
Effectively, pensions now behave more like a bank savings account, explains Matt, “with anyone over 55 being able to take out as much money as they like from their pension pot whenever they like and the first 25% of it is tax-free! However, the really great part about the new pension rules is that, not only can you dip in, you can also take advantage of the account and use it to save more and budget your retirement.”
The government’s inspiration behind this legislation is that this gives retirees a more positive retirement, in which pensioners can dip into their large lump sums and spend it as they see fit. The cash-in option is expected to be so popular that the government expects to gain an extra £1.2bn in income tax from people withdrawing from their lump sums (the first 25% will be tax-free, but the remaining 75% will be taxed at the standard income rate).
The abolition of the grimly named death-tax gives families greater opportunity to enjoy their retirement with the cash they earn and save. Plus, all pension assets can now be passed on to heirs, enabling the heirs to take out the pension money passed down to them as and when they like.
“Additionally a pension is now the only inheritable fund that is entirely free from inheritance tax. The new legislation creates a huge incentive to leave as much money in your pension pot as possible with the hope of encouraging everyone in the UK to begin saving into a pension scheme. In short, pensions just got a whole lot more attractive,” says Matt.
Making the right decisions for your future can seem a daunting prospect and it’s essential that you take expert advice. Harris Begley takes pride in offering a personal service that takes your individual circumstances into account. Get in touch for a free, no-obligation initial consultation to discuss your pension and plan for your future.
HARRIS BEGLEY FINANCIAL PLANNING
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