March 19th, 2014 / Insight posted in MKS Comments

Budget 2014: Pensions changes

“A surprise in the Chancellor’s Budget speech was the extent to which he intends to reform the pension regime,” says Tim Stovold, tax partner at Kingston Smith. “There is no change to the ability to draw 25 per cent of a pension fund tax free, but the remainder of any pension fund can also now be drawn without the existing 55 per cent charge being levied. This creates a number of opportunities for individuals to draw the entire balance of the fund at normal tax rates and then invest their funds outside of the regulation of a pension scheme and without the need to purchase an annuity. Sophisticated investors may choose to draw their pension funds and then reclaim the income tax they suffer using the government approved Enterprise Investment Scheme or Venture Capital Trusts but these can be high risk investments so there may be insufficient funds remaining to adequately provide for the individual throughout their whole retirement.”