Pensions just became interesting……….
When the Chancellor announced radical changes to pension legislation in the March 2014 Budget few were expecting such a positive outcome for pensions in general.
The changes come at a time when we are all concerned with having enough to live on during our ever lengthening retirement years that can become very expensive as we get older and may need to purchase expensive medical care. We are also concerned about how we can pass on assets to our heirs without large tax consequences.
The new flexibility made available by the change to pension rules will mean there are massive opportunities to make pension saving part of your core financial planning strategy. Pensions now provide tax relief on the way in, tax free lump sum (within limits) on the way out, tax advantaged investment growth whilst invested and now flexibility in drawing income at retirement. There is also the ability to pass on any unused fund to your heirs in a tax efficient way.
Change and flexibility bring many opportunities but also dangers. The simple fact that you are no longer compelled to purchase an Annuity with your pension fund means that the risk of ensuring that your pension provides an income for as long as you live now rests with you. This places a huge emphasis on you, the individual to ensure that your pension assets are invested and managed in the most appropriate way.
Understanding the impact of drawing an income from your pension whilst ensuring that the investment of the remaining fund is managed successfully is a technically complex operation and high quality financial planning advice is essential to ensure a good outcome.
Use of Cash Flow Modelling, risk controlled investment solutions and regular financial advice can assist you on a successful retirement journey. Knowing how long your fund is likely to last given a certain level of income, understanding the impacts of taking extra lump sums etc. can be invaluable in providing you with a good level of certainty in your retirement years.
Using your pension fund to pass assets on to your spouse or children has now become a realistic possibility with positive changes to the tax applying to pensions on death. Ironically for many people the attractiveness of pensions moving forward will be to save as much as possible and not draw out large amounts but instead leave the fund in tact to pass on to heirs in a tax efficient manner.
Rethinking retirement income
If you have other investments and assets that do or could produce an income, consider how these interact with your pension savings. The flexible nature of pensions with favourable tax outcomes means that you need to look at your overall asset base when considering retirement income to ensure the optimum balance is reached regarding where you draw your income from.
Francis Clark Financial Planning have specialist pension advisers who can guide you to ensure you make optimum use of the new found pension freedoms and avoid the potential pitfalls.
For the right advice from the right people call 0845 6434564.