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Thursday December 7th, 2023 

News Archive - March 2014

Busy busy busy


I have been a little tardy in updating the website news this year. Thankfully I have had my hands full dealing with enquiries from new clients. Our aim has always been to build our local client base, and I always enjoy meeting new people and helping them with their financial planning. Springtime is a good time to get your financial plans in place.

Call Mulberry Financial for an appointment if you want your pensions dusting.


2014 Budget - first thoughts


Some big changes to pensions in the 2014 Budget. MASSIVE changes are mooted for April 2015.

It looks as if the whole system of UK pension saving is being moved to something closer to the US system, where pension savers can withdraw money from their pension pot as and when required and without limits once they have reached the necessary minimum age. This money is taxed as income in the year that you withdraw it.

Technically, no UK pension saver is currently obliged to buy an annuity. In practice, the alternatives might be uneconomic for those with smaller pots due to the extra charges and minimum pot sizes required.

The planned increase to the ‘triviality limit’ from £18,000 to £30,000 will at least give people with very small pension funds more choice, although there are conditions which apply to drawing pensions under these rules. Just because the extra flexibility is available, it might not be the best option for everybody.

My initial concern with these changes is one of practicality. As with many previous changes in pension legislation, the rules have been changed but the old pension policies which were set up under the old rules are still in existence. These policies are not likely to be able to cope (admin-wise) with new introductions such as ‘flexible drawdown’ for small pension pots. So a transfer to a new plan might be necessary. There would then be additional costs involved. The Chancellor says that everybody will get free face-to-face advice on their pension options!! So it will be very interesting to see who is going to give this free advice.  

One other thing that springs to mind is that the US pension system does not have a ’tax-free cash’ option. It has been suspected for some time that the right to a tax-free lump sum from your pension fund could one day be removed. So this might be another step closer to that day.

On the non-pension side, the increase in the annual ISA limit to £15,000 per person and the removal of the Cash and Stocks and Shares ISA distinction is a welcome simplification.   


2014 Budget - second thoughts


After all the hoo-hah, I have been thinking about the ramifications of the proposed pension changes.

The first thing to remember is that the major changes are not scheduled to come into effect until April 2015. Before this date, it won't be possible to draw your pension fund flexibly unless you already have £12,000 per annum of pension income.

If flexible drawdown is your favoured long term solution, then you should not purchase an annuity now, because you will not be able to rewind this decision in the future.

It seems likely that a move to an income drawdown policy now would allow you to start taking benefits whilst still benefiting from the planned future changes when they arrive.

Another thing to bear in mind is that existing pension policies might not be able to facilitate the new flexible ways of drawing income. This would mean that a transfer to a new pension policy was necessary. There might be a set-up cost involved.

Regarding the much trumpeted increase in the 'triviality' limit from £18,000 to £30,000 - these figures represent the total value of your non-state pension savings. So if a person has (say) a decent final salary pension plus a personal pension fund of £28,000 - they would still not qualify to take the personal pension under the triviality rules.

From April 2015 this triviality limit will effectively disappear and all money purchase pension pots will be able to be turned into cash from age 55. However, for a higher rate taxpayer this would convert the £28,000 pension pot into a lump sum of just £19,600 after tax. (25% tax free, 40% tax on the rest)

When faced with the figures, I think that many people will decide to draw down pensions gradually rather than just cashing them in. As always, advice in this area will be critical.

Contact Mulberry Financial if the budget has thrown your retirement plans into turmoil.


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The material here is for general information only and is not intended to be relied upon for individual investment decisions. Appropriate independent advice should be obtained before making any such decisions. Mulberry Financial Ltd does not accept any liability for any loss suffered by any user as a result of any such decision.
The information is based on our understanding of current HMRC rules and practices (as at the news article date) which are always subject to change. Taxation and trust advice and Cash ISAs are not regulated by the Financial Conduct Authority. This site is aimed at UK residents only.
Please remember that the prices of shares and other investments can fall sharply. You may not get back the money you originally invested. Past performance is not necessarily a guide to the future.

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