How will the pension reforms affect you?
New pension freedoms for over 55s that were introduced at the start of the month represent the biggest shake-up to pensions in a generation. Although the reforms will change the way we save and spend before and during retirement, people are warned not to be too hasty.
For the first time, savers will be able to take up to 100 per cent of their pension as cash, allowing them to spend their retirement funds as they like. Most are expected to use the cash to meet daily living costs while some may choose to withdraw a lump sum and buy cars, holidays or home improvements.
The best option may be to wait before trying to access your money. The new tax year is likely to bring a rush of requests under these new rules, so there will invariably be a delay involved. However, and most importantly, taking your pension over a number of years instead of withdrawing it all at once will reduce your tax bill.
Nonetheless, this poses a problem because it is difficult to know how long you will need to withdraw a pension.
Poor investment performance could mean that the capital is used faster than you planned and if this happens, your withdrawals will need to be reassessed to give you as much of the capital as possible for future years.
For more information please contact Paul Wilkinson or your usual contact at the office.
Author: Paul Wilkinson FCA
A former pupil at Lancaster Grammar School, Paul moved away from the area and completed his training with KPMG in Birmingham, qualifying as a Chartered Accountant in 1989. He returned to Lancaster and joined Scott &...
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