Planning for Retirement

The Budget 2014 has seen a major development in Defined Contribution (DC) Pensions for over a generation.  Previously,  an individual saving throughout their life in a DC pension pot (also known as a money purchase scheme) could only access 25% of their fund as a tax-free lump sum on retirement. The problem was the other 75% and what they could or could not do with it. At one time, this balance had to be used to purchase a compulsory purchase annuity (an income for life) despite poor rates.  In recent years legislation enabled limited access to this 75% balance called income drawdown subject to 55% tax.  In any event, this was only up to a person’s 75th birthday when they still had to buy an annuity.

Well, the chancellor put an end to all of this and now there is free access to all of the 75% remaining after a 25% tax-free cash withdrawal.  Tax will only be at the individuals normal tax rate too (mostly 20% – a far cry from 55%).  However, annuities are still permissable if a better alternative. This presents a choice for the investor as never before and one in which Stirling House are not only licensed, but experienced to advise on.

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