The Pension Freedom introduced in April 2015 was good news but many people’s past experience of the pension world has made them very wary of really exploiting those freedoms. Now that is changing.
A recent survey by Aegon discovered that more than 20% of people had increased their pension contributions as a direct result of the greater flexibility provided by the changes. Why is that? What can you learn and what should you be doing?
If we get right back to basics the situation is that the traditional pension plan, where at retirement 25% of the fund could be taken as a lump sum and 75% had to be left to provide a lifetime income, has become simply a tax efficient savings plan from which you can take as much as you like when you like as long as you are prepared to pay the tax on it. And yet the tax relief on contributions remains in place.
Pretty much everyone’s a winner but these are the people who should get really excited and seriously consider maximising their contributions:
- Higher rate taxpayers aged 50 or over particularly if they expect to have periods when they will be basic rate taxpayers in future
- Women who have lost out on pension benefits in the past – now is a good time to start catching up
- Anyone aged over 50 who has investments they can re-allocate into pensions – all they are really doing is transferring to a more tax efficient savings plan
- Families looking to maximise inheritances – pension planning should now be a significant part of their inheritance planning strategy
- Anyone who hasn’t started a pension plan because they didn’t like the thought of tying up money for the rest of their lives
Aegon’s research also showed that people were paying more attention to their pension statements. Something we have been encouraging for some time.
Don’t get left behind. Now really is the time to pay more attention to your pension planning. If you have an adviser you like and trust ask him/her for a review but make sure you get a competitive fee agreement up front. Otherwise we like the online platforms such as Hargreaves Lansdown. They are cost effective, have a wide investment choice, and some very good guides and calculators.
If you need any help or guidance that is where The Investment and Retirement Coach Programme can help. Just pop your details in the “request more info” box and we will be in touch.
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