Business and financial
Pension decisions F
Alasdair MacDougall, director of Martin Aitken Financial Services, looks at the most radical changes to pensions in almost a century
rom April 2015, the Government is introducing the most radical changes to pensions since the
introduction of the Basic State Pension at the beginning of the 20th century. These changes will be signifi-
cant and of most interest to people with Personal Pensions and SIPPs. From April 2015, you will be able to take your entitle- ment to tax-free cash all in one go, or it can be spread over a series of years, enabling greater control over cash flow and tax. In addition, while your
money is in the pension, it can remain invested. So, if your investments perform well, you could end up with more money available to withdraw. Conversely, if your investments perform poorly, you could end up with less. Anybody with a Defined
Contribution Pension; for example, individual Stake- holder, Personal Pension, some AVC schemes and SIPP could benefit. Investors aged 55 or over in April 2015, should be able to
70 Scottish Dental magazine
take advantage of the increased flexibility straight away. Investors aged at least 55 will
have total freedom over how they take withdrawals from their pension, over and above any tax-free cash. Any with- drawals in excess of the tax-free amount will be taxed as income at your marginal rate. If you elect to take your
whole fund as cash in one go, you could potentially pay a top rate tax of 45 per cent if this withdrawal, when added to other income, exceeds £150,000. On top of the above pension
freedoms introduced in the 2014 Budget, on 29 September the Chancellor announced further radical changes to the tax treatment of pensions on death. Once these changes are confirmed, it should be possible for money purchase pension funds, including those already in drawdown, to pass
these funds on to nominated beneficiaries free of tax, in some circumstances. It is normally only possible
to pass a pension on as a lump sum, tax-free if you die before age 75 and you have not taken any tax-free cash or income. From April 2015, irrespective of your age, you can pass on your pension tax-free, provided your beneficiaries retain the money within a pension. Should they decide to make any with- drawals they will only have to pay tax if you died after age 75. You will also be able to
pass on an income, tax-free via income drawdown, to any nominated beneficiary that can include children, grand- children and remoter issue. If you die after age 75, your pension fund can be passed on to any nominated beneficiary, subject to a 45 per cent tax charge, unless it is paid as an
“These radical and positive changes make planning your future more attractive”
®
The purpose of this article is to provide technical and generic guidance, and should not be interpreted as a personal recommendation. This article represents our interpretation of current and proposed legislation as at the date of publication. These may change in the future. Martin Aitken Financial Services Limited is authorised and regulated by The Financial Conduct Authority.
income from the pension fund. If you elect to pass on your pension fund, in the form of an income after age 75, the income is taxed at the beneficiary’s marginal rate. These radical and very
positive changes to pension rules and regulations make planning your and your family’s future even more attractive. Martin Aitken Financial Services Limited has decades of experience in the pension’s field and would welcome the opportunity to review any existing money purchase arrangements. We can also review other
factors; such as charges, flexi- bility, risk profile, portfolio design and performance, to ensure that your arrangements are in keeping with your invest- ment objectives.
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