24th March 2014 at 4:50pm
In the Budget, we saw wide ranging changes for pensions and savings, which affect our customers.
The aim is to bring greater flexibility and control to pensions and savings by April 2015.
What if my total pension savings are under £30,000?
With more immediate effect, the Chancellor announced increased flexibility for people with small pension pots. With effect from the 27 March 2014, people whose total pension savings amount to £30,000 or less will be able to take the whole amount as cash. The previous figure had been £18,000.As usual, the first 25% would be a tax free lump sum, with the rest taxed at your usual income tax rates.
What’s Standard Life doing to help, if you have pension savings over £30,000?
Whilst this is all good news and a bonus for those who’ll benefit under the new small pot rules, what about those who’ve saved more than £30,000?
As of 20th March, people with £30,000 of pensions savings – reduced from £50,000 – will be eligible for income drawdown with us.
From 20th March 2014, we’ve decreased the amount which our customers need to have saved to be able to access our income drawdown range. With the main pension changes not coming into force until 2015, some people might be considering delaying their retirement until then in a hope to benefit – you may not need to. As of 20th March, people with £30,000 of pensions savings – reduced from £50,000 – will be eligible for income drawdown with us.
What is drawdown?
Drawdown is available with a flexible kind of pension, called a SIPP. By using drawdown, we believe this can help you bridge the income gap and put you in a strong position until 2015.
But with this added flexibility comes responsibility. You need to think about where your money is invested, any tax implications and how you can use this flexibility whilst still making sure you have enough income to last you through your retirement. Drawdown means that, in the interim, you can take a tax free lump sum of 25% that supports your immediate needs in retirement, whilst still leaving your pot invested. Come 2015 and the new rules, you can then review your strategy. The flexibility and choice offered by income drawdown lets you do that.
But with this added flexibility comes responsibility. You need to think about where your money is invested, any tax implications and how you can use this flexibility whilst still making sure you have enough income to last you through your retirement. Life expectancy is on the rise, so you don’t want your savings to run out. Before you make any decisions on income drawdown we’d always recommend you speak to an expert.
All eyes on April 2015
The Chancellor hopes by putting these massive reforms in place for April 2015, it will change the way many people fund their retirement. So do we. In the meantime, we’d like to take this opportunity to increase your options.
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This blog should not be regarded as financial advice. The best approach will depend upon individual circumstances.
A SIPP is an investment. Its value can go up or down and may be worth less than what was paid in.
An income drawdown arrangement should be reviewed regularly to ensure that the pension fund can sustain the required level of income being taken.