2015 pension freedom

gets the green light

The Government response to the 2015 ‘freedom & choice' consultation delivers on the Chancellor's Budget promise of much more pension flexibility and provides further detail on some of the changes in store from next April. The announcement confirmed:

Pension flexibility will go ahead from April

2015.

A £10k Annual Allowance will apply after a

client accesses flexibility, to counter abuse of

the new freedom.

The guidance guarantee will be delivered by a

range of independent providers, including MAS

and TPAS.

Tax-free cash will stay at 25%.

Defined Benefit transfers will still be allowed -

but only after professional

advice.

Death benefit tax will come down from 55% -

new tax rate to be confirmed in Autumn

Statement.

Normal minimum pension age is going up to 57

from 2028.

Income flexibility from April 2015 The headline income flexibility will go ahead as promised. Individuals of pension age will be able to take what they want from their defined contribution pension pot, when they want it. The key is using this new flexibility sensibly to meet financial needs tax-efficiently - which is where professional advice comes into its own. Pension holders will have a new right to transfer to a new scheme or provider to access this flexibility where their current scheme doesn't offer it. In particular, existing restrictions will be lifted so that members of occupational schemes will now be able to transfer at any point up to their scheme's normal pension age. And existing ‘secure income' rules will be relaxed to allow income providers to innovate when designing new income solutions to meet changing client needs.

2014

2014

Anti-avoidance controls Once an individual has accessed the new flexibility, their pension annual allowance will drop to £10k. The trigger for this drop in Annual Allowance will be when they first start taking drawdown income. Existing ‘capped drawdown' users on 5 April 2015 won't be caught, as long as their drawdown income remains within the income cap, and existing ‘flexible drawdown' users will benefit from the £10k Annual Allowance.

Guidance guarantee Savers will have access to free, impartial guidance on their pension income choices from a range of independent providers with no vested interest in selling a financial product or service, including MAS and TPAS. The guidance won't be FCA-regulated, but FCA will set standards for guidance providers and monitor compliance with those standards.

Tax-free cash The Government won't tamper with the right to normally take 25% of a DC pension pot tax-free. This should give clients more confidence to keep their retirement savings inside the tax-advantaged pension wrapper until they're needed.

Defined Benefit transfers Pre-retirement members of funded DB pension schemes will be allowed to transfer t to access the new income flexibility if they want to, but only if they've taken advice from an independent FCA-regulated professional first.

Pension age - going up Normal minimum pension age will increase to 57 in 2028, when the State pension age goes up to 67. This will affect anyone born after March 1973.

Going forward, the minimum pension age will be linked to 10 years before State pension age.

Existing special rules for the Armed Forces and Emergency Services will continue, but the Government is considering how best to treat others with protected low pension ages.

Why Thomas Carroll?

We have the honour of being named ‘The Chartered

Financial Planners of the Year1 by the Personal

Finance Society – the body which grants Chartered

status to IFA firms and individuals. Our title

demonstrates the excellence, commitment to

professionalism, training and development of our

people which our clients and professional colleagues

have come to expect from us.

We have recently been awarded Firm of the Year2,

Corporate Adviser of the Year2 and Retirement

Planning Firm of the Year3 by Bankhall Group, the

UK’s largest distributor of financial services.

Contact us

If you wish to discuss the content of this brief in more

detail please contact Louise Eedy directly on 02920

855 244 or e-mail louise.eedy@thomas-carroll.co.uk

This information is based on our current

understanding of UK law and HM Revenue & Customs

practise and legislation we believe may apply in the

future. No guarantees are given regarding the

effectiveness of any arrangements entered into on the

basis of these comments.

1 Awarded by the PFS in 2010

2 Awarded by Bankhall Group in 2014 3.Awarded by Bankhall Group in 2010 and 2011

01 01