March 08th, 2017
The ‘new age’ pensioner
Dale Gough, financial planner at Prosser Knowles Associates, looks at the greater freedoms we have when it comes to accessing our funds.
I remember my grandparents celebrating retirement with an almighty knees up! Inevitably followed by “drawing their pensions”, putting their feet up, Grandad lighting his pipe and enjoying some serious down time together. They have remained in the same house, travelled very little and enjoyed time at home with their family. Health has been a restricting factor, Grandad worked as a bricklayer for nearly 50 years. This has taken its toll on his knees and joints in general. Nan, on the other hand is made of kryptonite. We regularly joke that she will be going far longer than any of us. A creature of habit, she can be found pottering around the house or garden come rain or shine.
These days, retirement is the excuse a lot of our clients need to go and enjoy themselves in any way they know how. Shorter working lives and reduced manual labour has led to the baby boomers looking to enjoy a far more active retirement than we have seen historically. From the ultra-marathon runner to the retired Doctor sailing around the world … we’ve seen it all in recent years.
Historically, such requirements have not always been easy to facilitate. Like most things worthwhile they have taken a lot of hard work and forward planning prior to becoming a reality. This was often the case due to some very rigid legislation.
Then came “pension freedoms” … During the April 2015 budget, George Osborne announced his plans to implement huge changes to the way individuals access their pension plans at retirement, by way of “pension flexibility”.
This would be a complete change in the pension landscape, leaving retirement benefits far more flexible than has ever been known, at the point at which benefits are taken.
Anyone aged 55 or over with a personal pension can take their pension monies however they want, whenever they want. There’s now complete freedom.
A word of warning at this stage, before we get too excited. Whenever the Government make a large change to legislation, it is usually to raise additional revenue by way of tax.
On access of your funds, you would traditionally utilise your available 25% tax free cash (this rule still remains). The surplus 75% of the funds however will be taxed as income at your marginal rate, (20% if you pay basic-rate tax, though you may want to avoid your pension income taking you over the 40% tax threshold).
For most people, accessing a pension at 55 will be too early, so it can remain untouched until suitable to access. However we are coming across more clients on a regular basis who are looking to begin their retirement planning now in order to facilitate the retirement that they want to achieve.
The only trick that Mr Osborne has appeared to have missed during this legislative change is, that whilst he has announced such fantastic freedoms for those housed in a personal pension/defined contribution scheme, he unfortunately failed to put the onus on providers to facilitate such actions. Many pension providers have, so far failed to implement suitable provision to allow flexible income from the plans as described above.
With this in mind, it is imperative that when starting your retirement planning, you speak with an independent financial adviser in relation to such matters in order to ensure that the existing provision is suitable for your needs.
If you would like to arrange a free, no obligation consultation, please feel free to contact one of our highly qualified team who will happily arrange a meeting at a time and place convenient for you.
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Prosser Knowles Associates Limited is Authorised & Regulated by the Financial Conduct Authority. The value of your investment can go down as well as up and you may not get back the full amount invested. The Financial Conduct Authority does not regulate Taxation and Trusts. The information in this document does not constitute advice or a recommendation for any product and you should not make any decisions on the basis of it. Your home may be repossessed if you do not keep up repayments on your mortgage.