The Bettr Blog

Freedom!!!!

Apr 2, 2015 | Financial Advice, Investing

[vc_row row_type=”row” use_row_as_full_screen_section=”no” type=”full_width” text_align=”left” background_animation=”none” css_animation=””][vc_column][vc_column_text]2015 is set to herald some brand new rules which are set to transform the way pensions are viewed. George Osbourne has radically swept aside some of the restrictions (and taxes) associated with accessing your pension giving the UK one of the best, and most generous, pension systems in the world.

Better Access

Gone is the annual restriction on how much you can take from your pension. Pensioners will now be able to access their pension pots in full. The chancellor’s announcement that ‘No one will have to buy an annuity…’ appears to be great news for everyone in that, in future (from April 2015), you will be able to access your pension pot when you want and how you want. But should you?

As is often the case the story is not quite so simple and it all comes down to tax. Take out too much from your pension and it will be taxed at your marginal rate; in other words any withdrawal is added to your other income and taxed at your highest rate (in many instances this would result in a tax rate of 40% and in some instances 45%).

Better to instead view your pension as a lifelong investment plan offering ongoing favourable tax benefits and investment opportunities.

Less Tax

Currently, in some cases, your beneficiaries could receive what is left of your pension pot less a 55% tax charge.

From April this rule will also be removed meaning that in many cases the amount inherited will be free from tax or at the very worst will only be taxed at the beneficiary’s marginal rate of tax.

Generous Tax Relief

Contributions to a pension remain, for the vast majority, the most tax effective way of building a pot of money for their retirement. With an annual allowance of £40,000 (and often scope to contribute more) most people have the opportunity of benefitting greatly from the generous ‘leg up’ that tax relief gives a retirement fund.

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Disclaimer: This document is intended for informational purposes and no action should be taken or refrained from being taken as a consequence of it without consulting a suitably qualified and regulated person.  It does not constitute financial advice under the terms of the Financial Services and Markets Act 2000. It is not an offer to sell, or a solicitation of an offer to buy, the instruments described in this.

Investments involve risks. The investment return and principal value of an investment may fluctuate so that an investment, when redeemed, may be worth more or less than its original value. Past performance is not a guarantee of future results. There is no guarantee strategies will be successful.