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Rickard Keen Financial Services:
Are you ready for the changes to pensions?

In April 2015 one of the biggest changes to pensions in recent history will take place and for the first time ever thousands of people will be able to access their full pension pot and hand on their savings to future generations.

As well as introducing greater flexibility, the changes will create an increased need for sound retirement planning advice to ensure each individual’s needs are met. This guide has been designed to give a general overview of the key changes. However, in order to get expert advice that is tailored to meet your specific retirement plan, please contact Rickard Keen Financial Services.


Understanding the changes to pensions

From April 2015 people will have more choice than ever before on how they drawdown and subsequently invest their pension pots.

This will mean that from the age of 55, people with defined contribution pension savings, such as those in Personal Pensions and Money Purchase arrangements, will be able to:

  • buy an annuity
  • take out all their pension savings in a lump sum
  • keep their pension pot invested and access it over time.
  • pass on their pension pots on death to any beneficiary

Free to choose

  • Under the current tax system, people can take 25 per cent of their defined contribution pension pot tax-free when they retire, paying tax at their marginal (highest) rate on any income drawn from the remainder.
  • If they choose to withdraw the rest of their savings now, they must pay 55 per cent tax. This has traditionally led people to invest in an annuity to provide an income that will maintain them during their retirement.
  • From April 2015, pension savers with a defined contribution scheme will be able to take one or a series of lump sums from their pension. A quarter of each lump sum will be tax-free and any other funds taken out will be taxed at their marginal rate of income tax – normally 20 per cent for most individuals.

Switch your scheme

  • Some people with defined benefit pensions will also be able to benefit from the change by switching their savings to a defined contribution scheme. This will apply to people in a private sector or funded public sector scheme – people in unfunded public sector schemes will not be able to transfer.

Pass on your savings

  • People with a defined contribution pension who die before the age of 75 will be able to pass on unused pension to any beneficiary tax-free. Currently beneficiaries pay 55 per cent tax if they receive a lump sum from a pension where some money has already been taken out.
  • People with a defined contribution pension who die after the age of 75 will also be able to pass on unused pension to any beneficiary. When the recipient withdraws money as income from the fund, it will then be taxed at their marginal tax rate, or at 45% if taken as a lump sum.

Be Warned

For those who continue to accumulate a pension via a Money Purchase arrangement but also take income after 6th April on another plan via:

  • Flexible Access Drawdown (FAD)(in the new regime)
  • Flexible Drawdown (as in the present regime)
  • Uncrystallised Funds Pension Lump Sum
  • Capped Drawdown where the income is above the GAD limit

then they will be restricted on the accumulation pot to an Annual Allowance of £10,000. The Annual Allowance is presently £40,000.

From 6th April, all new drawdown plans will be FADs and hence the £10,000 Annual Allowance restriction is triggered. The higher annual allowance can be preserved by commencing a Capped Drawdown before 6th April.


Don’t Forget

For those wishing to make a substantial pension contributions, it is possible to utilise Carry Forward, where after maximising the present year’s allowance, one can use up the annual allowances for the last 3 years.


Now is the time to talk

With the change to pension rules quickly approaching now is the time to talk with a firm that can put you on a path to future financial security. At Rickard Keen Financial Services we pride ourselves on being ‘Intentionally Different’ – this means that where most Independent Financial Advisors (IFAs) finish, we begin.

We look for the most innovative and an effective solution to meet your needs and start by finding out what it is you want from your pension investments.

Questions to consider:

  • What kind of retirement do you realistically hope to enjoy?
  • Do you want your investments to be tax-efficient?
  • Is a traditional annuity right for me or do I want to try something different?
  • Is the underlying investment strategy in line with your risk attitude and potential retirement term?

Luckily for those individuals approaching the age of 55, there has never been more choice and many may find themselves confused and uncertain over which option best meets their retirement plan. At Rickard Keen Financial Services we take time to look at your individual circumstances, so we can understand where you are now and where you want to be in the future.

Our team of highly-qualified IFAs can review your retirement plan and put together an investment scheme that works for you. We appreciate the years of hard work that has gone into your pension pot and always aim to make the most out of your savings, both before and during your retirement.

If you would like advice on pension investments or would like to find out more about Rickard Keen Financial Services, please contact us.

© Rickard Keen Financial Services.
Rickard Keen Financial Services Ltd. is an appointed representative of French & Associates Ltd. which is authorised and regulated by the Financial Conduct Authority.

Rickard Keen Financial Services Ltd | Clearview House 599-601 London Road Hadleigh Essex SS7 2EB
Tel/Fax: 01702 428880 | E-mail: admin@rkfinancialservices.co.uk

Rickard Keen Limited | Glenny House, Fenton Way, Southfields Business Park, Basildon, Essex, SS15 6TD.
Tel: +44 (0)1268 548127 | Fax: +44 (0)1268 548715 | E-mail: kate.bell@rickardkeen.co.uk

www.rkfinancialservices.co.uk

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