Whilst
everyone is digesting the impact of the Budget announcements, there is little
doubt the overall relaxation and potential reduction in the ‘tax take’, from our
pension funds, has been well received.
Sadly,
the use of the word ‘trivial’ with regard to smaller pension funds is at best
inappropriate and at worst unavoidable due to our modern working practice and a
more transient population. No matter how small a pension pot it is important to
acknowledge that its owner has worked hard to build up these funds and certainly
deserves better recognition for their efforts than – ‘trivial’.
That
said, these same individuals have potentially been handed one of the most
favourable retirement planning strategies in the Budget.
The
ability to withdraw 100% of a fund, below £10,000, as a lump sum (up to three
times in their lifetime) with 25% of the fund being tax free and the remainder being
taxed at their marginal rate increases an individual’s overall retirement
flexibility - especially as there will be no requirement to purchase an annuity.
Amassing
several small pension funds, over a lifetime, is currently the norm and not the
exception. But with auto enrolment gathering momentum the likelihood for
everyone to have several small funds in the future highlights that retirement planning
will become more important and possibly more complex in future.
For
some withdrawing 100% of their pension funds, as cash, may be wholly
appropriate; whilst for others the decision may not be as clear cut.
Whichever
side of the fence you sit on in the current retirement planning debate and no
matter the size of your pension fund there has never been greater need for
independent financial advice than at present.
Helen Wilson
Consultant
Telephone: +44 (0)20 7893 3456
Email: getintouch[@]broadstoneltd.co.uk
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