As the Chinese philosopher Confucius once said, ‘to know what you know and what you don’t know, that is true power’.
With less than two months to go before the new pension freedom becomes reality, having an understanding of the new rules and how they will benefit you could prove powerful indeed.
With the Chancellor’s new pension rules coming into effect in April 2015, never before has there been such freedom and choice available to us over how we can access our cash in retirement. For instance you can:
- – Buy a fixed regular income that is guaranteed for life
- – Have regular access to your money, through income drawdown
- – Take more cash than just your tax free amount of 25% (anything over the 25% is taxed as regular UK income)
- – Or a combination to suit you
While this is great news for us all, research shows there’s still a degree of confusion as to how these new rules will affect us and how to make best use of them. Flexibility should not mean complexity. With flexibility comes choice and with choice will come decisions. With so many options available, there are many more choices to make – and while there’s little doubt we can benefit, it’s also worth thinking about potential pitfalls:
- – Paying too much tax
- – The impact of inflation, or
- – Running out of money
Financial providers are in a strong position to share their industry-expertise, knowledge and know-how to help bridge any knowledge gaps and help people make informed decisions as a result.
Finding more information
If you would like to get a better understanding of pension reform and what your options are then a good first step might be to attend one of our ‘Ready when you are‘ events. These are an excellent opportunity to hear experts speak on a range of aspects around pension reform. They’ll also be in a position to answer any questions you might have.
And it’s always worth checking out the moneyplus blog too, where we regularly run articles on pension reform, sharing insight on what’s changing, what to be aware of and how you might benefit.
The savings landscape is evolving and we can all potentially gain as a result. These welcome changes to pensions give us flexibility, tax efficiency and access to our cash like no generation before us. It’s important we all make the most of it.
As with any investment the value of your investment can go up or down and may be worth less than what was paid in.
Laws and tax rules may change in the future and the information is based on our understanding at February 2015. Your personal circumstances also have an impact on tax treatment.
There are excellent resources online if you’re interested in doing further reading on pensions and the reforms taking place in 2015.
On Silversurfers, you can find the latest articles in our pensions section, while other publications like the Guardian, Financial Times and Independent all offer dedicated sections to news on pensions and the new reforms.
The Government website has further reading on state pensions, while services like The Pensions Advice Service, Money Advice Service and Pensionwise all offer up-to-date information and provide answers to many common questions and concerns.
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