The current coalition government desires every individual to have immensely more control over their pension than they do currently. In the most extreme application of the planned reforms it will be possible, from April 2015, for anyone over the age of 55 to take their entire pension pot as cash. The first 25 per cent will be able to be taken tax free with the remaining 75 per cent being taxed at the individual’s marginal rate of taxation. The remaining pension pot can be used for anything. A holiday, a car, a yacht, whatever the individual desires.
Possibly the major driver for these sweeping pension reforms was to reduce the dependence on annuities which are not the right pension vehicle for everyone. Rather than being restricted on what individuals can invest their pension in the person in question will have complete freedom in their choices.
However, with increased freedom comes greater responsibility and splurging all your pension on a yacht may not be the best strategy to keep you comfortable in your advancing years. Different people have different needs and different attitudes to risk and responsibility. With these reforms the pension landscape will become more complex due to the increased choices and, arguably, more information and advice will be required. We at Clayton Holmes Naisbitt will be happy to help you through this period of immense change. Please contact 0113 3878240 for more information and advice.