Pension Release

Pension Budget Changes 2014

Turn your pensions into cash with pension release!

In the 2014 budget the Chancellor George Osborne announced that there would be significant changes to the pension system in the UK starting in April 2015.

July 2014 saw an amendment to some of those initial budget proposals, the main points were as follows

If you are over 55 you will be able to take all of your defined contribution as a lump sum and turn your pensions into cash colloquially named pension release.

If you have a final salary pension, also known as an unfunded public sector defined benefit pension, you will NOT be able to transfer it to a defined contribution pension (DC scheme), to take advantage of this new pension release facility.

It is important to note that the local government pension scheme LGPS is the only one not affected

A transfer from a private sector final salary pension scheme to a Defined Contribution, (DC) scheme all not be affected, but if you wish to move your money and turn pensions into cash, then you will have to prove that you have taken some professional pension advice.  This would be by a professional financial advisor or an IFA authorised by the Financial Conduct Authority. There are also some changes to certain pension benefits that were previously taxed at 55% they would now be taxed at your current income tax rates.

 

Details of Pension Cash Drawdown

Assuming these changes are agreed by Parliament in April 6, 2015 you will be able to do the following.

• Providing your 55 and you have a personal pension, sometimes called a money purchase pension or a defined contribution pension you will be able to take all of the money in your pension pot and turn your pensions into cash.
  25% of this will be tax-free the balance of which would be added to your income for that year and will count as additional income and taxed accordingly.
• The defined contribution pension scheme is one where your individual contribution and any employers contributions are invested to produce a pension pot on retirement. These include personal pensions, stakeholder pensions, group personal pensions and occupational money purchase pension schemes.
• To expand on another major change, if you have an unfunded public sector defined benefit also called a final salary pension or a career average pension you will NOT be able to access it until retirement and you also not be able to transfer your benefits to a defined contribution scheme (DC), as you can do at the present time The schemes involved in these pensions are those in the public sector such as teachers, NHS, civil service, police firefighters and the Armed Forces this means you have to to simply accept the benefits as provided by these schemes.
• The only exception to this is where ALL your pension pots add up to less than £30,000 this does not include your state pension, then you may turn pensions into cash as previously indicated.
• The government also intends to introduce something called a permissive statutory override this will allow schemes to ignore the previous scheme rules and follow the current, tax rules. This is in order to make payments flexible or to provide for the drawdown facility also known as pension release.

 

Free Pension Advice

Every individual with a defined contribution pension will be able to have free and impartial advice or guidance on their options as they  approach retirement. This is known as the “guidance guarantee”. The pensions advisory service (TBHS) and the money advice service. (MAS), will be appointed to provide this assistance.
A new requirement for anyone wanting to take advantage of this pension release scheme will be that they have to take advice from a professional financial advisor who is also independent. This IFA must be authorised by the FCA this must be done before the request can be approved.
An additional new rule will be that anyone who takes more than their tax-free cash sum from a defined contribution scheme will have an annual allowance to make further tax relievable contributions where the pension pot is greater than £10,000.
Additionally, the minimum age at which pension benefits can be taken will increase from 55 to 57 in 2028 and will be linked to 10 years before the state pension age after that The state pension age is expected to creep upwards.

If you want to turn pensions into cash then fill in the contact form and we will get in touch or click the button below.