Budget 2014: Pensions changes – comment from Kingston Smith Financial Advisers
Chris Hogarth, Financial Planner at Kingston Smith Financial Advisers, comments:
“Whilst it now seems commonplace for the Budget to throw in a pensions curve ball, this year’s statement produced the most radical in years. It was a relief to see the 25% tax free cash go untouched; in fact, the Chancellor has gone full circle announcing that, from 2015, anyone over the age of 55 will be able to draw as much as they wish from their pension fund in addition to the 25% tax free lump sum.
“From next year, maximum withdrawal caps will be removed and the current flat 55% tax charge will be replaced by an individual’s marginal rate (with the majority of people paying 20%). The knock-on effects of this will undoubtedly bring troubled times ahead for the annuity market. This is a surprising move which will see maximum flexibility for pensioners in the withdrawal of their funds.
“These changes provide a number of positive financial planning opportunities, but could produce an ugly side for those that do not plan wisely. There is a risk that this flexibility may be abused and pensioners who exhaust their funds early in retirement may find themselves falling in to a state-supported lifestyle later in life.”
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