PERSONAL FINANCE
sum, 25% of it will be tax-free and you’ll pay income tax on the rest. Buying an annuity either at the point you retire, or at a later stage, you can still use any pension savings to buy an annuity – an insurance contract that offers a guaranteed lifetime income. Getting Advice there is no doubt that all these changes make pensions a
more attractive proposition but the new rules also increase the range of potential outcomes: some will undoubtedly enjoy a more prosperous retirement, receiving a higher pension income and paying less tax. Others will mis- calculate and, sadly, run out of money. there are also some potential traps for the unwary; for example, once you have used the new pension income freedoms, your tax-advantaged annual contribution limit for defined contribution pensions will fall from £40,000 to only £10,000.
Although the rules may be changing, the Government is
not forcing pension providers to offer all of the flexible options. you may find, particularly if you belong to an older scheme, that your choices are restricted. you could switch your pension to a provider that offers more flexibility but there may be a charge for doing so. Although the Citizen’s Advice Bureau and Pensions Advisory service will offer free guidance on these issues, these organisations will not be offering qualified, regulated financial advice. this means that they cannot make any specific recommendations and, importantly, if you do make the wrong choices there will be no legal recourse, either through the courts or the Ombudsman, over the guidance you received.
Pilot Financial Planning is authorised and regulated by the FCA. this article is intended to provide helpful information of a general nature and does not constitute financial advice.
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Tailor-made and pro-active management accounting systems designed to meet the very specific needs of owner managed businesses
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Headed by Jane Madigan, an independent accountant with over 25 years experience in both practice and industry.
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-janemadigan@fsmail.net
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