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The 2014 Budget had plenty to whet the appetite, including some of the biggest and most radical shake-ups to the UK pensions regime in a long time.
As well as making access to Defined Contribution (DC) pension funds (including personal pensions and SIPPs) easier and more flexible, significant changes were announced to the taxation of DC pension withdrawals and to the tax treatment of pension funds on and following death. The rules for Defined Benefit (e.g. final salary) schemes remain largely unchanged, and aren’t covered further in this newsletter.
The majority of the new rules will apply from April 2015, but unfortunately, flexibility doesn’t always mean simplicity. Many elements of the new rules are complex, and specific advice will be essential. Broadly, however, some of the highlights of the new regime are as follows;
It has been announced that everyone affected by the changes will be able to access free and impartial guidance, via the internet, over the phone, or at a Citizens Advice Bureau. While this general guidance could be useful, we recommend that advice on your pension planning should always involve your own financial adviser, and should take into account all other aspects of your financial position, to ensure that you have sufficient income in retirement, as well as achieving maximum tax efficiency both now and in the future.
For some, the new rules really could mean having two bites at the cherry - a 40% taxpayer making a £100k gross contribution to a pension scheme will obtain tax relief of £40k, and if they then pass their £100k fund (plus tax free growth) to their beneficiaries (as opposed to other personally owned assets which would attract IHT on death), they could save in excess of £40k in IHT.
If you’re hungry for more, your Tax Adviser at Springfords will be happy to liaise with your financial adviser to provide a joined-up analysis of your pension position in preparation for the new rules. If you don’t currently have a financial adviser, we’d be happy to make some suggestions. Contact us on 0131 440 5000 or firstname.lastname@example.org if you'd like us to help.
This is a general guide which is intended to give background information and is not a substitute for taking specific advice based on your particular circumstances.