Category: Retirement

Why having a target in mind clearly makes a difference to fund this stage of your life

A recently published report has highlighted the positive impact planning and professional financial advice can have on income levels in our retirement. The first Retirement Income Uncovered report from Old Mutual Wealth found that retirees who hadn’t set themselves an income target to aim for in retirement had an average income of £17,500 per year. However, those who saw a financial adviser at least once have an average income in retirement of £20,800.

Accessing your pension safely, without unnecessary costs and a potential tax bill

With the biggest pension reforms in a lifetime rapidly approaching on 6 April, are you ready for how these reforms could potentially affect you, whether now or in the future? The wide media coverage that followed the 2014 Budget announcements talked of pensions in the future being used as bank accounts and new pension freedoms leading to long waiting lists for Lamborghinis.

Baby boomers are some of the least prepared for retirement

A recent survey has revealed the concerning fact that 40% of baby boomers, those aged 55 to 74, have not started to save specifically for retirement yet, despite two-thirds of respondents understanding the State Pension will not be sufficient.

Interim rules from 27 March 2014

Unlike a conventional personal pension, which is used to build up a pension fund until a chosen retirement age is reached, income drawdown is used to pay an income once someone decides to retire or semi-retire. The remainder of their fund remains invested, rather than using it to buy an annuity.

Freedom to pass on an unused defined contribution pension

People with defined contribution pension savings will no longer have to worry about their pension savings being taxed at 55% on death. Commencing from 6 April 2015, individuals will have the freedom to pass on their unused defined contribution pension to any nominated beneficiary when they die, rather than paying the 55% tax charge which currently applies to pensions passed on at death.

New system to encourage further pension saving

Currently someone in income drawdown cannot receive tax relief on future contributions. To encourage further pension saving under the new system:

Tax rules amended to allow greater innovation

The tax rules will also be amended to allow innovation in retirement products. This is happening in a number of ways:

Defined benefit pension schemes beyond 6 April 2015

The transitional rules on triviality and small pots will continue to apply to defined benefit pension schemes beyond 6 April 2015. The minimum age for accessing pension savings in this way will reduce from 60 to 55.

Safeguards to protect pension benefits

Transfers from defined benefit schemes to defined contribution schemes will continue to be allowed (but will exclude pensions that are already in payment). However, transfers from defined benefit schemes to defined contribution schemes will be restricted for members of unfunded public sector schemes, although you may be allowed to transfer in very limited circumstances.

Building up a pot of money that can be used to provide an income in retirement

With a defined contribution pension, the member builds up a pot of money that they can use to provide an income in retirement. Unlike defined benefit schemes, which promise a specific income, the income the member might get from a defined contribution scheme depends on factors including the amount they pay in and the fund’s investment performance.