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Salary-related pension based on the number of scheme membership years
Some employers offer these schemes, also known as ‘salary-related pension schemes’. When someone retires from the scheme, it pays them a pension where the benefit is based on rules set out by the scheme. Read the rest of this entry »
Shopping around to obtain a higher rate
Prior to the commencement of the pensions reform changes, historically purchasing an annuity has been the most common way of turning someone’s pension savings that they’ve built up over the years into an income that will last them the rest of their life. Read the rest of this entry »
New legislation allows increased payment flexibility
If someone is a member of a defined contribution scheme from 6 April 2015, they will be able to access their pension fund, in full, without needing to purchase an annuity. With a defined contribution pension, you build up a pot of money that you use to provide an income in retirement. Unlike defined benefit schemes, which promise a specific income, the income you might get from a defined contribution scheme depends on factors including the amount you pay in and the fund’s investment performance.
Flexible rules
The tax-free lump sum of up to 25% of the fund will remain available, with any remaining balance taxed as income. These flexible rules will apply to Additional Voluntary Contributions (AVCs), an extra pension contribution members of an Occupational Pension Scheme can make to help boost their income in retirement. In addition, these flexible rules also apply to cash balances and some hybrid schemes, subject to the pension scheme rules.
New arrangement
The new legislation also allows schemes to bypass their present rules, to allow them to give the increased flexibility to their members. But, as the rules are permissive, scheme providers can choose not to
offer the new flexibility. If this happens, someone may have to transfer to a new arrangement to take advantage of the new payment flexibility.
Transfer benefits
Currently, you only have the right to transfer pension benefits up to a year before your scheme’s normal benefit age, and the Open Market Option doesn’t force providers to offer transfers to any other products. However, from 6 April 2015, this legislation will be amended allowing transfers right up to the point of retirement.
Approaching retirement
The Open Market Option (or OMO) was introduced as part of the 1975 United Kingdom Finance Act and allows someone approaching retirement to shop around for a number of options to convert their pension.
T he main beneficiaries of the pensions freedom reforms are likely to be those who have built up relatively large pension pots, who will be using this freedom to avoid paying 40% tax when they draw it down under the new freedoms. Read the rest of this entry »
10 things about the wide-ranging
changes you should know
The pension system is completely being overhauled to enable individuals to take their defined contribution pension how they like in order to create greater choice and flexibility. These changes were announced in Budget 2014. From 6 April 2015, no matter how much an individual decides to take out from their defined contribution pension after retirement, withdrawals from their pension will be treated as income; the amount of tax they will pay on what they withdraw will depend on the amount of other income they have in that year, as long as you are 55 or over. This is instead of being taxed 55% for full withdrawal, as it has been previously. Read the rest of this entry »
When someone reaches retirement, they can take up to 25% of their pension as a tax-free lump sum (called the ‘pension commencement lump sum’). The remaining 75% has usually been used to purchase an annuity, a financial product that provides them with a guaranteed income for life, or been left invested, allowing them to take a portion of their pension pot each year to provide an income – known as ‘income drawdown’. Read the rest of this entry »
Greater choice and flexibility about how retirees use a
pension pot to fund retirement income
T he 2014 Budget announced major changes to the way that members of a defined contribution pension scheme could access their pension savings. In March 2014, the Chancellor George Osborne announced changes to the pension world which would revolutionise the way members of defined contribution schemes could access their pension benefits. These wide-ranging changes move away from individuals being required to purchase an annuity and instead offer a number of different options for drawing their pension benefits. Read the rest of this entry »
Many of Britain’s over-55s say the massive changes to retirement income announced in last year’s Budget 2014 will have no impact on them, research from Aviva’s latest Real Retirement Report shows. Read the rest of this entry »
The run-up to the tax year end on 5 April 2015 is the perfect time to consider tax planning opportunities and to put in place strategies to minimise tax throughout 2015/16. Read the rest of this entry »
The typical Briton entering the workforce today can expect to have nine jobs, including one major career change, across 48 years of working[1]. Read the rest of this entry »
