Pension savings have evolved considerably since the major changes announced in 2006 that were supposed to herald the new age of pensions simplification. Eight years on we have had changes up and down in the lifetime limit and annual contribution limits, accompanied by transitional protection regimes each time a change has been made.
We have seen retirement options move from controlled flexibility right through to total access and at the end of 2015, dramatic and unexpected changes made to death benefits, that finally mean that many investors can see this fund being available for their families and beneficiaries down the generations.
The key decision you need to make is how to build a fund of an adequate size to support you and your lifestyle throughout a period of retirement that for many of us is predicted to get quite a bit longer than our previous generations.
Here are some of the recent changes and their affects:
- You can pay up to £40,000 of your earnings each year into your pension fund. This is your annual allowance.
- Tax relief continues to be granted at your highest rate of tax and you can have a fund of up to £1.25million. This is your lifetime limit.
- You can take up to 25% of your pension fund as a tax-free lump sum from the age of 55 without having to draw an income.
- The income you take can still be in the form of an annuity, but it does not have to be and there no maximum or minimum income limits.
- If you die before age 75, your widow, dependents or beneficiaries can take tax free income or lump sums after 6 April 2015.
- If you die after 75 owning a pension fund this can still pay out lump sums or regular income and the recipient will pay income tax at their marginal rate.
- All forms of additional ‘income related’ state pension have been abolished and will be replaced by a single level and non-means tested state pension.
- The death benefit rules are the same whether the pensioner has taken benefits or not.
- By 2018 the majority of working age employees will have been automatically enrolled into a workplace pension.
- The new rules on retirement and death benefits will be extended to these new pension savers.
Pensions may not have got much simpler in recent years, but they definitely have become more attractive.
However you decide to accumulate enough wealth to live comfortably in later life, it should be a priority and at Willis Wealth Management we can help you towards that goal by showing the progress you have made and helping you understand what you can do to reach a satisfactory target and successfully manage your retirement years.
To find out more about our Services please contact our team today on T. +44 (0) 28 9032 9042 or fill out the form below: