If you’re not in a job where pensions come as part of the package – like teaching or the police – deciding how to make provisions that will allow you to enjoy your retirement to the fullest can seem very complicated.
The Chancellor has recently introduced major changes to make pensions a more appealing way of saving for retirement. So what’s new?
- All businesses, both large and small, are being asked to set up workplace pensions and both employers and employees will pay contributions to the chosen scheme (auto-enrolment).
- At the end of the saving period the pension will no longer have to be placed into a poor value annuity.
- From April 2015, people will be free to draw their pension as and when they wish.
- From 27th March 2014, those with small pension pots of less than £30,000 can take the whole amount. 25% will be tax free and the rest taxed at individual marginal rates.
- Anyone using drawdown options for their retirement income will now be able to draw more. Before 27th March the maximum withdrawal limit was 120% of the Government Actuarial Department’s prescribed rate. From now on it will be 150% - an increase of 30%.
These changes have raised concerns about people having the ability to take out all of their savings and the subsequent tax implications – as well the possible impact on our retirement plans. Negotiating the many options available can seem daunting, which is why we always recommend speaking to an independent financial adviser.
Whether it’s your personal pension, occupational pension or state pension, making an informed decision now can give you peace of mind for the future. Depending on what stage of life you’re at, we can either help you start saving or adjust your current plan to ensure that you’re getting the best deal on the market.
If you’re starting out
Putting the right strategy in place from the offset is invaluable which is why we recommend talking it through with one of our independent financial advisers.
If you already have something in place
Pensions change continuously and that is why we suggest reviewing your pension plans annually to ensure that your money is invested correctly.
As your income grows or declines you many want to adjust the amount you’re paying into your pension -this can be done by changing your premiums or adding a lump sum. Circumstances change over the years, your personal financial adviser will be able to guide you through the options available and design a plan to help you make the most of your pension fund.
From October 2012, new legislation has meant that every employer will need to have a pension scheme in place, automatically enrolling certain workers and making pension contributions on their behalf.
Companies with fewer than 250 staff will need to have set up an auto-enrolment pension scheme by April 1st 2014. For smaller firms with fewer than 50 employees, the start date will be between August 2014 and February 2016.
There are an array of corporate pension services on the market right now and our advisers are fully informed on the new legislation. The Government recommends employers seek professional advice to carefully guide them through this process, but we are more than happy to talk to employees about the scheme too.