Female Focus - Now in our 22nd year!
Page 6 “Pension Freedom or Not, that is the question...”
From April 6th 2015 holders of UK Pensions aged 55 years old have the right to take their pensions in a different manner and not be forced to buy an annuity or take a drawdown pension. They will have the right to take it as a lump sum. This sounds great but consideration needs to be given to a number of issues.
1. If you take the lump sum, for UK taxpayers this will be added to the income in that tax year, after the allowance of a 25% tax free lump sum. This could mean the tax on a lump sum taken could be as high as 45% i.e. the highest marginal tax rate. If taken as a Spanish taxpayer the whole lump sum is taxed at your highest rate including the 25% tax free portion in UK.
2. Spending monies at 55 which were designed to provide income in your old age could be very dangerous, as the income will not be easy to replace. So the joys of spending the lump sum on a car, reforming the house, or a holiday may very likely bite back later.
A strong message from me is to seek good financial advice from a company registered in Spain which can provide a UK regulated report setting out the options. Indeed this is compulsory for UK final salary schemes, and we at deVere are able to provide this at no cost to our clients.
I have been busy updating my clients on what are their options. Every month, and particularly this month because of the new legislation, please do take advice before making any decision without knowing the full facts. A wrong decision could prove costly.
The deposit interest rates being offered by banks here in Spain and the UK for month on month deposits are stagnant at best, and deceasing at worse, with far below inflation returns being offered on lock-up monies, and insultingly the Revenue taxes the interest at 20%.
The answer is to bite the bullet and create a vehicle where assets can return above inflation returns, and also be tax compliant in Spain. My knowledgeable clients do this and are achieving income returns of 8% per year, with an acceptable low level of risk, the income being received on a quarterly basis and thus enhancing their lifestyles.
Thanks to all the readers that have contacted me, I hope the advice I always give has been useful.
I am at the Lifestyle Show at the Denia Marriott Hotel on 10th and 11th April where we have a stand, and I will be talking on financial matters on both days. The Show is going to be informative and great fun, so come to the Marriott Hotel and treat yourself to a worthwhile day out.
For more information on any financial matters you may have contact me on
steve.iball@devere-spain.es or mobile 610 822 484.
Female Focus
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