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07 Jan 2015

Getting The Perfect Pension This 2015

With the pension reforms due to come into force on 6 April, 2015 looks to be an important year for those who are due to retire or have put off their retirement until now. Senior personal finance reporter Katie Morley recently wrote an article for The Telegraph explaining how they can take advantage of the new rules to get the best possible pension this year.

As of April, anyone over the age of 55 will have access to their pension pot - there is no need for annuity, and they can take it all out in one go or use it ‘like a bank account´, withdrawing smaller amounts at any time. There will also be no more ‘death tax´ on pensions, which previously stood at 55%.

If you plan to retire this year, Morley advises that you act fast. Getting your plans in order can take months, and often difficult decisions need to be made, so get ahead by locating all your pension funds and working out their total worth. Then, evaluate your pension beneficiaries (those who can access your money if you pass away) and nominate one person to benefit from your defined contribution funds - these will become more tax efficient under the new rules.

Next, check whether you are entitled to a tax-free lump sum larger than 25% - you might even find that you can boost it to 100%. However, this must be taken before 6 October 2015, and if you need to transfer to another provider the deadline closes on 6 April 2015. Explore your other pension options; not every provider will allow all of the new freedoms, so decide which best suits your needs and change provider accordingly - but be warned that this process can take up to 10 weeks.

Morley also advises all savers - whether they are due to retire now or in a few years´ time - to draw up a retirement plan, bearing in mind how many years they might live for, what kind of lifestyle they will want, and how their needs might change. They should then work out the annual income needed to fund this. Those some way off retirement should compare their current income with what they might need when they retire; if there´s a shortfall, they either need to make that up or prepare to change their lifestyle.

Copyright M2 Bespoke 2015.

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