The New Pension Freedoms April 2015 Frequently Asked Questions.
During the March 2014 Budget, George Osborne announced new rules that affect how each of us can access our pensions. Those new pension freedoms rules came into force in April 2015.
The new pension rules have certain implications for when we can get access to our pensions but, be aware, there are still certain situations where you can trigger high tax charges and fees by accessing your pension savings.
On this page, we’ll summarise the new pension freedoms April 2015 and detail some things to be aware of as you review your options in the new pensions landscape and answer frequently asked questions
Contact us here if you have any questions about your individual pension, savings or your circumstances.
What are the new pension freedoms?
The new pension freedoms open up a range of options. In the past, many people who retired used their pension to purchase an annuity. An annuity exchanges your pension savings for a guaranteed income for the rest of your life. Although an annuity provides security it often comes at a cost and any money left in the annuity when you die could potentially go to the provider, rather than to your family.
An annuity may well still be the correct option for you, providing you with structure for your retirement and a regular income.The freedoms do, however, open up the opportunity for more people to make use of a flexible drawdown arrangement. Instead of swapping your pension fund for an annuity, flexible drawdown keeps your pension invested and allows you to withdraw an income from it as you see fit. This can be advantageous in several ways, giving your pension the opportunity to continue growing, giving you the flexibility to vary the income that you take and, with careful planning, ensuring that income lasts throughout your retirement.
An annuity and a flexible drawdown arrangement, are just two of the options however, and choosing which of these and the many other possibilities is right for you is an important and complicated process. We highly recommend taking Independent Financial Advice to help in your retirement.
Should I take all of my pension using the new pension freedoms?
Whether this is suitable for you will depend very much on your individual circumstances, your pension provider and your goals for your retirement.
It is important to remember that your pension will need to last for your entire retirement. If you are planning on withdrawing it under the new pension freedoms then how are you going to fund the rest of your retirement? Careful planning here is essential.
Are you considering withdrawing a significant proportion of your pension pot? It is essential to carry out proper planning first. We can help. Call us on 0800 043 8341 or EMail firstname.lastname@example.org
Do The New Pension Freedoms Apply To Me If I Am Already Drawing A Pension.
At present no they do not but if you have purchased an annuity there may be an option available in future to cash it in. The Government has announced that those who have already purchased an annuity may cash it in from April 2016 but full details are still to be announced. Those cashing in an annuity will then have the same options, under the new pension freedoms, as those approaching retirement.
Do The New Pension Freedoms – April 2015 Allow Me To Cash In My Pension Before I am 55
Unless there are clearly defined exceptional circumstances then no you cannot (unless you want to incur a large tax bill). There are plenty of scammers in the marketplace that will try to convince you otherwise so beware.
The FCA is doing its best to close down the scammers and the Government has invested in various advertising campaigns to warn pension holders of the dangers but the onus remains on you to avoid falling for a scam. If you do lose your pension savings to one of these scams there is very little chance you will be able to recover your loss. Read more here.
If I want to use the new pension freedoms, what should I do?
The first step for anyone considering withdrawing a large amount of their pension through the new pension freedoms is to seek out independent financial advice. Even if you approach your pension provider directly first it is likely that they will recommend the same course of action to you.
An adviser will be able to take you through the reasons for using the pension freedoms and may be able to suggest alternatives that will secure whatever result you are attempting to achieve.
If you and your adviser decide that it is best that you access some of your pensions using the pension freedoms then the adviser will be able to liaise with your pension provider on your behalf, securing a workable arrangement to allow you access to your capital.
You may, of course, already know an independent adviser, but The Pension Review Service can assist if you require further guidance.
Can I use the new pension freedoms April 2015 with my workplace pension?
This will depend on what type of pension your workplace pension is and whether it is subject to any restrictions briefly above but, in many cases, the answer will be yes.
Even if your workplace pension does not qualify for the new pension freedoms there are beneficial reasons why you may consider a transfer of your funds from your original workplace scheme to another scheme, besides the fact that they would then be eligible for the freedoms.
Do the new pension freedoms apply to final salary pensions?
The pension freedoms apply to most final salary schemes although some such as the NHS and the armed forces are excluded to avoid overdue potential strain on the public purse. However, for some of these individuals there is one potential option that may be worth investigating in specific circumstances. Call on 0800 043 8341 to learn more.
Can I take my pension but keep working?
Yes you can if you are over 55 years of age and have a personal pension. You could continue working for your present employer (some employers apply restrictions), or find another job, or work part time. If you have an occupational scheme restrictions may apply.
You can even take your pension and keep paying in to that pension (subject to statutory limits). If you are in drawdown. Continuing to work can boost your retirement fund and/or ensure it lasts longer into your old age.
You can take the state pension when you reach state retirement age and still work or you could even defer taking your state pension until later to boost your payments in later life (although there are risks with this approach). In all of the above scenarios you need to be careful of the tax implications.
What is a SIPP
A self-invested personal pension (SIPP) is a personal pension plan that enables the holder to choose and manage a wide range of investments.
Historically, most pensions relied on fund managers (often employed by the pension company) to achieve pension fund growth utilising a relatively small and controlled set of investments. With SIPPs you either manage a wide range of potential investments yourself or pay a management company to manage your fund, and where it is invested, on your behalf.
Do you have more questions regarding the new pension freedoms – April 2015? Get in touch with us here and we’ll help in any way we can.