Not only is the Government changing the rules, making the advice process more complicated but people’s retirement experience is changing too. Retirees are living longer and spending retirement money differently than ever before. This unprecedented level of change brings more options for our clients, whether they are at retirement or some way off. We like to help our clients as much as possible so we discuss some of the changes that are happening in this article.
Welcome to the new era of retirement planning. Below is a summary of just a few of these changes affecting most people planning to retire at some point:
Increase in the minimum pension age.
The Government will consult on raising the minimum age at which individuals can take their private pensions; from age 55 to 57 with effect from 2028. In addition they are proposing that the minimum pension age for private pensions will rise in line with increases to the state pension age (SPA). This would mean the age that individuals could take their private pension always being 10 years below the SPA.
Ability to take all defined contribution pension savings as a lump sum at retirement.
From 6 April 2015 the consultation proposes that for defined contribution schemes only there will be a new option; to take tax-free cash with the balance as a taxable lump sum. This lump sum would be taxed at the individual’s marginal rate.
Increase in maximum drawdown limit. On or after 27 March 2014:
The triviality limit will increase from £18,000 to £30,000. This will only apply to individuals using triviality for the first time.
The ‘stranded pots’ limit is increased from £2,000 to £10,000. Up to three ‘stranded pots’ will be allowed from personal pension or stakeholder plans. The number of ‘stranded pots’ that can be taken from occupational pension schemes remains unlimited.
This means that an individual with personal pensions will be able to take up to £30,000 from ‘stranded pots’, and an additional £30,000 under triviality from age 60. It’s now more important than ever that our clients not only take the right advice at retirement but also make the right decisions whilst they are building up there fund.
If you would like to learn more about retirement planning or require advice on pensions, you can get in touch with Bright by calling 0800 6 888 222.
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