Freedom and choice in pensions – Use it or lose it!

We have already explored the changes that are emerging from George Osborne’s March 2014 Budget and although many of these aren’t effective until next year, it may seem odd to be talking of the possibility of losing out when so much flexibility is becoming available.

That said, there are some options currently available where acting now could be more beneficial than after April 2015, as they will disappear.

Trivial commutation and small pots

Some people who have reached age 60 could withdraw up to £60,000 from their pension plans before next April, but for this to be effective you must have separate individual pension plans, each worth less than £10,000.

If you are still earning, you may be able make a lump sum pension contribution and receive tax relief on the full amount before accessing your pension savings. 25% of this would be paid tax-free and may suit those who require a lump sum immediately, but who also intend to continue to save and retire at a later date.

Existing capped drawdown plans

If you have an existing drawdown arrangement (where the fund remains invested and an income is taken from it) and have reached age 55, you may be able to further consolidate your savings into your existing arrangement and still be able to make pension contributions up to £40,000 per annum. Be aware though, that any income being taken from the arrangement may still be restricted to your current Government Actuarial Department (GAD) limit.

Block transfers

If you have a pre-6 April 2006 Section 32 buyout plan (a plan that accepted a transfer from an old occupational pension scheme) or one member executive pension plan in place, you may be able to transfer to a pension arrangement that allows you access to the new retirement options even if your current contract does not permit it.

To do so you must transfer all benefits under the existing arrangement in one transaction prior to 6 April 2015 and take all of the benefits within the receiving scheme before 6 October 2015.

These options apply to very specific, individual circumstances and you may wish to speak to your Financial Planning Consultant sooner rather than later to find out if you are able to take advantage.

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