And on that (pension) bombshell… thumbnail

And on that (pension) bombshell…

The Chancellor resisted ending the budget speech as above, but it would have been appropriate.

The oft quoted reason for not funding a pension is the requirement to purchase an annuity with the proceeds.  Whilst this has ceased to be an issue due to changes introduced over the last few years, the government has decided to go one step (or giant leap) further. As of April 2015, anyone aged 55 or over will be able to withdraw their entire pension fund and spend it as they wish.  So should you elect to withdraw it?

This really depends on many factors, and dependent on the individuals circumstances.

It may for instance be suitable, for those with smaller pots  who will have access to only a small lump sum and income, will be able to withdraw their entire fund and do something more meaningful with it, possibly repaying their mortgage and/or other debts.

For those with larger sums, the decision process will be more difficult. There is little to be achieved by withdrawing funds from a tax privileged environment, paying tax on the taxable portion and then simply leaving it in the bank.

Some may consider withdrawing funds to purchase residential (buy to let) property, one of the few investments excluded from pensions.  Whether this is suitable will be debatable though. Putting all, or the majority of, your former pension fund into one single asset (œeggs and œbasket come to mind), is a concern.

As with any major change, the implications are significant and the government quite sensibly has delayed the introduction for a year to allow for consultations with interested parties.

With great power comes great planning responsibility to paraphrase Spidermans Uncle Ben.  Advice will be more important than ever in order to guide you through the myriad of options and to help select the most suitable path.

As independent financial advisers, Cave & Sons are ideally placed to provide bespoke planning advice to help you to achieve your retirement goals. If you would like to discuss your retirement plans please contact Gregg Taffs Chartered Financial Planner at Cave & Sons for an initial no cost meeting.

Cave & Sons Ltd is authorised and regulated by the Financial Conduct Authority. FCA number 143715