Budget 2015: good news for savers, first-time buyers and pensioners

by Patrick Goddard, Independent Financial Adviser

By and large, it was the pre-election Budget that everyone expected; and it provided at least something for most people to smile about. 

Overall there was plenty of good news for our clients at every stage of their financial journey – along with some announcements that mean certain clients need to plan or take action soon.

Pensioners with annuities

For those who have already retired, the biggest headline was annuities.  From 2016 it is proposed that pensioners will be able to trade in their existing annuities for cash, if their provider permits it.  The cash can be taken as a taxable lump sum (with the 55% tax charge abolished and tax applied at the marginal rate); or it can be used to provide a flexible annuity; or invested to provide a flexible retirement income.

New pension rules: don’t forget about tax

by Paul Northmore, Managing Director

The new pension rules announced last year come into effect on 6th April 2015 – “Freedom Day”.  

From that date, if you are 55 or over you can withdraw your entire ‘defined contribution’ pension pot as a cash lump sum if you wish.  (‘Defined contribution’ means how much you receive depends on what you’ve paid in.) 

Many are tempted by the new freedom.  A recent survey by The Pension Advisory Service and TD Direct Investing indicated that 24% were planning to take at least half of their pension pot as cash. 

But there are some important tax considerations.

The new tax rules for pensions

75% of each lump sum you withdraw is subject to tax – and your pension pot withdrawals are classed as ‘income’ and taxed by the same rules.  This means: