The Pensions Bill Amendments 2014
Al, I can but echo TOFU's praise and thanks that he heaped upon you and yes quite well thanks, hope the same goes for you, though I suspect that Osborne's bombshell is going to keep you mighty busy for quite a while.
So annuities dead, draw-down going that way too, so where from here? Rhetorical question I guess as events dear boy will point the way. Mrs Chug was about to get one annuity from three separate pension plans, but I think this a sit on your hands moment, while we consider what to do about all the flashing lights and loud klaxons that have suddenly erupted. As you say, interesting times!
Bon chance mon ami!
So annuities dead, draw-down going that way too, so where from here? Rhetorical question I guess as events dear boy will point the way. Mrs Chug was about to get one annuity from three separate pension plans, but I think this a sit on your hands moment, while we consider what to do about all the flashing lights and loud klaxons that have suddenly erupted. As you say, interesting times!
Bon chance mon ami!
AlR:
Not only knowledgeable but eloquent too
An excellent service.
May I put something to you for scrutiny so that (myself and) others may benefit.
Scenario, based on recent budget results:
In theory, I pay £20,000 cash lump sum into my pension fund.
HMG adds 20% to said fund which is approx £5100. Fund now worth £25100.
I claim back (via a cheque from HMRC - if I ask them to do it this way, rather than via PAYE coding) my extra higher tax relief of 20% which is another £5100.
With that money, I put it back into my pension fund @ 20% tax relief which is: £1200 approx. I then claim the higher tax relief on this @ £1200 by cheque.
The £1200 goes into the fund...dah di dah HMG adds £300 and I claim back the extra higher relief of £300 and put this into the fund.
Final result is:
£20,000 front loaded and voila we see £33,000 in the fund. A return of 65% TAX FREE.
THEN.........(when I retire / over the age of 55)....I take it ALL out of the fund i.a.w. the new regime, some of which is completely tax free and the rest at my then current tax rate, say 20%.
65% front ended return and 20% back ended.
[And this is before I actually work my SIPP to maximise returns].
Please please tell me this is merely a pigment of my constipation and I will wake up shortly
Not only knowledgeable but eloquent too
An excellent service.May I put something to you for scrutiny so that (myself and) others may benefit.
Scenario, based on recent budget results:
In theory, I pay £20,000 cash lump sum into my pension fund.
HMG adds 20% to said fund which is approx £5100. Fund now worth £25100.
I claim back (via a cheque from HMRC - if I ask them to do it this way, rather than via PAYE coding) my extra higher tax relief of 20% which is another £5100.
With that money, I put it back into my pension fund @ 20% tax relief which is: £1200 approx. I then claim the higher tax relief on this @ £1200 by cheque.
The £1200 goes into the fund...dah di dah HMG adds £300 and I claim back the extra higher relief of £300 and put this into the fund.
Final result is:
£20,000 front loaded and voila we see £33,000 in the fund. A return of 65% TAX FREE.
THEN.........(when I retire / over the age of 55)....I take it ALL out of the fund i.a.w. the new regime, some of which is completely tax free and the rest at my then current tax rate, say 20%.
65% front ended return and 20% back ended.
[And this is before I actually work my SIPP to maximise returns].
Please please tell me this is merely a pigment of my constipation and I will wake up shortly
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Thomas,
Be careful. Any benefit paid by the state (taxable or non taxable) is not treated as ‘Relevant earnings’ for the purposes of further Pension Tax Relief. My advice would be to change your name, deactivate your PPRuNe account immediately, alter your appearance and leave the country - HMRC got massive new powers yesterday!
Recycling or churning is a particularly fine line to walk. HMRC doesn’t want to stop people growing pension benefits and using tax relief, and it offers a lot of latitude. But you have to play by its rules and observe what it wants. If you plan it right, if you document it right, if you demonstrate that your circumstances legally and fairly, fall into the spirit of the guidance, you’ll be ok. Doing that isn't too hard.
If though, you simply take your pcls and chuck it into a pension, then wait for a letter from HMRC to land on your doormat. I have done a number of sizeable contributions for clients this past month and the documentation is squared away and the justification is all there for if HMRC ever raises an inquisitive eyebrow.
Chuggers,
If Mrs C has three pots, they may be collectively large enough to allow her to take the money as she sees fit, or, possibly more likely (?), if they are modest sums, she still has a new ability to draw the money in an incredibly tax efficient way.
The Finance Act 2014 (FA14) makes reference to orphan pots that may be drawn down in one go if they are small enough (now, under FA14, the pot can be as large/small - whichever way you look at it - as £10,000). The issue which still isn’t clear is whether or not those small separate pots (up to a maximum of three) can be used irrespective of other pension wealth (ie; Mrs Chuggers may have £500,000 in one pension and 3 x £9,999 pots). The technical departments of the pension providers have all been posting slightly conflicting opinion today and npo one really knows. There isn't really a consensus opinion yet that has got any validity, so I’m waiting for the dust to settle.
There is also the new revised guidance surrounding Triviality which, under FA14, now allows clients to draw far more flexibly from a pot of up to £30,000. The question about which the jury is still out, is, if someone has £29,999 and also 3 x £9,999 would they have the option of drawing the 3 x £9,999s before turning to Triviality?
The battlelines into which tax wrapper you use are much more blurred now. A year or so ago, the conundrum may have been something as simple as ‘ISA or pension’. And whilst they both have uniquely beneficial features still, the difference is not as great. The ability to take your personal pension fund as you like and taxed at your marginal rate, if you have income as low as £12,000 is a complete game changer.
Previously, this flexible way of drawing income applied to anyone who had £20,000 guaranteed annual income and with some clients, the extraction of wealth in retirement revolved around getting that figure. But even then, the taxation was punitive. Now though, the ability to take income in retirement almost as you would take income from an investment, is open to those with (AFPS) annual income as low as £12,000.
It means that a SNCO/WO or Flt Lt or Sqn Ldr who had the choice of pension Vs ISA, and who chose ISA because although it didn’t give the tax relief, it offered unfettered access, now has to ask him/herself – why wouldn’t I want a pension which can be drawn from 55 (going up to 57 in 15 years time or so) AND get the 40% help AND possibly get my child benefit back.
Pensions just became hugely more attractive for high rate taxpayers now, who will be basic rate taxpayers in retirement. A year or so ago, we were talking about pensions as if they were dead. Now, it looks as if GAD, Drawdown as we knew it, trivial commutation etc will be abolished next year.
So assuming that you take your tax free cash, the remainder of a crystalised pot then acts broadly similarly to an investment. Look on a pension fund a little like you would an ISA, but with slightly different tax treatment.. maybe even a VCT. Withdrawals are taxed at your marginal rate but but with no tax deferred and there will be a further tax assessment on death - but it looks like no IHT attached.
Growth is nearly tax free and as I said yesterday, I would guess in pension companies all over the land, new product designers are rushing to get something ready quickly for those who are currently in capped drawdown who qualify for flex drawdown in a few days time.
Ed Milliband could divert an earthbound meteor, cure AIDS, solve global warming, consign famine to history, create a Middle Eastern love in and go paddling off Beachy Head and stub his toe on the wing of MH370.. and he'd still be treated like an idiot. What happened yesterday was unprecedented - a revolution in how we should be regarding retirement - it is not too strong to describe it in those terms. Most people reading this messageboard will be impacted because they'll have at least £12,000 from AFPS and should be beating a path to their banker, broker or adviser.
Finally.. you gotta smile. We have been told for the best part of a year that pension liberation predators are stalking our pensions – now we know why they were clamped down on – hey, George was the biggest liberator of all. To what end, and to what effect though? Hmm.
Be careful. Any benefit paid by the state (taxable or non taxable) is not treated as ‘Relevant earnings’ for the purposes of further Pension Tax Relief. My advice would be to change your name, deactivate your PPRuNe account immediately, alter your appearance and leave the country - HMRC got massive new powers yesterday!
Recycling or churning is a particularly fine line to walk. HMRC doesn’t want to stop people growing pension benefits and using tax relief, and it offers a lot of latitude. But you have to play by its rules and observe what it wants. If you plan it right, if you document it right, if you demonstrate that your circumstances legally and fairly, fall into the spirit of the guidance, you’ll be ok. Doing that isn't too hard.
If though, you simply take your pcls and chuck it into a pension, then wait for a letter from HMRC to land on your doormat. I have done a number of sizeable contributions for clients this past month and the documentation is squared away and the justification is all there for if HMRC ever raises an inquisitive eyebrow.
Chuggers,
If Mrs C has three pots, they may be collectively large enough to allow her to take the money as she sees fit, or, possibly more likely (?), if they are modest sums, she still has a new ability to draw the money in an incredibly tax efficient way.
The Finance Act 2014 (FA14) makes reference to orphan pots that may be drawn down in one go if they are small enough (now, under FA14, the pot can be as large/small - whichever way you look at it - as £10,000). The issue which still isn’t clear is whether or not those small separate pots (up to a maximum of three) can be used irrespective of other pension wealth (ie; Mrs Chuggers may have £500,000 in one pension and 3 x £9,999 pots). The technical departments of the pension providers have all been posting slightly conflicting opinion today and npo one really knows. There isn't really a consensus opinion yet that has got any validity, so I’m waiting for the dust to settle.
There is also the new revised guidance surrounding Triviality which, under FA14, now allows clients to draw far more flexibly from a pot of up to £30,000. The question about which the jury is still out, is, if someone has £29,999 and also 3 x £9,999 would they have the option of drawing the 3 x £9,999s before turning to Triviality?
The battlelines into which tax wrapper you use are much more blurred now. A year or so ago, the conundrum may have been something as simple as ‘ISA or pension’. And whilst they both have uniquely beneficial features still, the difference is not as great. The ability to take your personal pension fund as you like and taxed at your marginal rate, if you have income as low as £12,000 is a complete game changer.
Previously, this flexible way of drawing income applied to anyone who had £20,000 guaranteed annual income and with some clients, the extraction of wealth in retirement revolved around getting that figure. But even then, the taxation was punitive. Now though, the ability to take income in retirement almost as you would take income from an investment, is open to those with (AFPS) annual income as low as £12,000.
It means that a SNCO/WO or Flt Lt or Sqn Ldr who had the choice of pension Vs ISA, and who chose ISA because although it didn’t give the tax relief, it offered unfettered access, now has to ask him/herself – why wouldn’t I want a pension which can be drawn from 55 (going up to 57 in 15 years time or so) AND get the 40% help AND possibly get my child benefit back.
Pensions just became hugely more attractive for high rate taxpayers now, who will be basic rate taxpayers in retirement. A year or so ago, we were talking about pensions as if they were dead. Now, it looks as if GAD, Drawdown as we knew it, trivial commutation etc will be abolished next year.
So assuming that you take your tax free cash, the remainder of a crystalised pot then acts broadly similarly to an investment. Look on a pension fund a little like you would an ISA, but with slightly different tax treatment.. maybe even a VCT. Withdrawals are taxed at your marginal rate but but with no tax deferred and there will be a further tax assessment on death - but it looks like no IHT attached.
Growth is nearly tax free and as I said yesterday, I would guess in pension companies all over the land, new product designers are rushing to get something ready quickly for those who are currently in capped drawdown who qualify for flex drawdown in a few days time.
Ed Milliband could divert an earthbound meteor, cure AIDS, solve global warming, consign famine to history, create a Middle Eastern love in and go paddling off Beachy Head and stub his toe on the wing of MH370.. and he'd still be treated like an idiot. What happened yesterday was unprecedented - a revolution in how we should be regarding retirement - it is not too strong to describe it in those terms. Most people reading this messageboard will be impacted because they'll have at least £12,000 from AFPS and should be beating a path to their banker, broker or adviser.
Finally.. you gotta smile. We have been told for the best part of a year that pension liberation predators are stalking our pensions – now we know why they were clamped down on – hey, George was the biggest liberator of all. To what end, and to what effect though? Hmm.
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If you're employed and if the investments are funded out of income, then yes. If you're a gentleman of leisure and if your income is derived from (for instance) Dividends or CGT, then HMRC will look on that differently.
Main classifications of relevant earnings here:
RPSM05101150 - Technical pages: contributions and tax relief: member contributions: entitlement to tax relief: relevant UK earnings
Main classifications of relevant earnings here:
RPSM05101150 - Technical pages: contributions and tax relief: member contributions: entitlement to tax relief: relevant UK earnings
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Thomas.. you've been warned! 
Did you spot this? Budget gives HMRC power to raid your bank account ? like Wonga ? Telegraph Blogs
Did you spot this? Budget gives HMRC power to raid your bank account ? like Wonga ? Telegraph Blogs
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Thomas - your chips haven't really been p###ed on at all - you just need to "do the math" better...
You put in £20000.
Tax man grosses it up to £25000 (the first 20%)
You get your next 20% back via cheque as before. Put this £5000 in your pocket.
You now have a fund worth £25000 which actually only cost you £15000 thanks to your refund... that's a 67% return!! No matter how much you recycle it will still come out at 67%
You put in £20000.
Tax man grosses it up to £25000 (the first 20%)
You get your next 20% back via cheque as before. Put this £5000 in your pocket.
You now have a fund worth £25000 which actually only cost you £15000 thanks to your refund... that's a 67% return!! No matter how much you recycle it will still come out at 67%
Last edited by Sketretal; 21st Mar 2014 at 20:25. Reason: Had a couple of beers so unsure of accuracy
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One aspect thing of the orphan pot aspect is that someone with income to support it, could make a tax grossed single contribution of £9,999 and then take the lot back out a few days later with no tax implication. Three small similarly sized pots are allowed. 20% growth overnight, and then you get your money back. You have to ask yourself, why would older people consider an ISA when that might be worth taking advice on?
Steve Webb yesterday:
Defined Ambition (DA) models will affect Defined Benefit (DB) schemes, which could finally start to dissapear completely. The death knell for public sector DB pensions has not yet been rolled out or even chimed, but someone in government will almost certainly be looking around for the brasso just in case it's needed.
Webb's love for collective defined contribution schemes, a la Dutch model, is well known (it is if you're a pension geek). I can't see how DA proposals can support the rape 'n pillage approach announced by Osborne. If the new concept of DA risk is that it is shared intergenerationally, might it be that either the new DC guidance is changed again, possibly in the life of the next Parliament?
Going back to my earlier point, even if DB public sector schemes do survive, Webb has to make AFPS more affordable. So it might be that he focuses on various discretionary benefits, such as the existing statutory indexation (to put it in context, CPI/RPI bunfight will look like handbags at dawn by comparison), spouse's benefits and an automatic transfer of benefits once you've handed your 1250 (in old money) back and yet more changes to theage that you can take benefits.
I wouldn't be surprised to see an AFPS preserved pension date of a year or two later in life - Webb is already referring to 70 or a 50 year working life as the new average more and more. We are being conditionally, subliminally. After the flash bang of this week and whilst we are used to absolutely nothing now being off the table, what better time to unsheath the velvet blade - whilst we're all still be treated for concussion?
As I write, I realise how clever he is. There is stuff in there that the life insurance companies will gratefully buy into because the effective scrapping of annuities has trashed their share prices this week (not the same as pension fund values being hit). Webb has potentially blown away their previous resistance because they now, somehow, have to face up to the new reality of replacing annuity income.
If the state does hand over the accumulated DB pot to be converted into a new DA, or collective DC scheme where the member shoulders some of the risk, they will have the lost income restored because they'll now be looking after the old DB liability and the state will have shifted its DB liability, brilliant!!!
Steve Webb yesterday:
In addition, we will create a new ‘defined ambition’ framework for workplace pensions, enabling new forms of risk sharing between employers and employees.
Webb's love for collective defined contribution schemes, a la Dutch model, is well known (it is if you're a pension geek). I can't see how DA proposals can support the rape 'n pillage approach announced by Osborne. If the new concept of DA risk is that it is shared intergenerationally, might it be that either the new DC guidance is changed again, possibly in the life of the next Parliament?
Going back to my earlier point, even if DB public sector schemes do survive, Webb has to make AFPS more affordable. So it might be that he focuses on various discretionary benefits, such as the existing statutory indexation (to put it in context, CPI/RPI bunfight will look like handbags at dawn by comparison), spouse's benefits and an automatic transfer of benefits once you've handed your 1250 (in old money) back and yet more changes to theage that you can take benefits.
I wouldn't be surprised to see an AFPS preserved pension date of a year or two later in life - Webb is already referring to 70 or a 50 year working life as the new average more and more. We are being conditionally, subliminally. After the flash bang of this week and whilst we are used to absolutely nothing now being off the table, what better time to unsheath the velvet blade - whilst we're all still be treated for concussion?
As I write, I realise how clever he is. There is stuff in there that the life insurance companies will gratefully buy into because the effective scrapping of annuities has trashed their share prices this week (not the same as pension fund values being hit). Webb has potentially blown away their previous resistance because they now, somehow, have to face up to the new reality of replacing annuity income.
If the state does hand over the accumulated DB pot to be converted into a new DA, or collective DC scheme where the member shoulders some of the risk, they will have the lost income restored because they'll now be looking after the old DB liability and the state will have shifted its DB liability, brilliant!!!
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Thanks for all this info, Al.
So, having accrued as a late AFPS 75 entrant (soon switching to AFPS15 having signed a 2 year extension) am I right in saying this has no immediate impact to me? Well, until I start contributing through a different employer?
So, having accrued as a late AFPS 75 entrant (soon switching to AFPS15 having signed a 2 year extension) am I right in saying this has no immediate impact to me? Well, until I start contributing through a different employer?
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If you're 40 or so, then yes - your new civvy pension will change (benefits from 57 for instance).
But this budget affects everyone. Even a 70 year old who annuitised last week and who now must be distraught. Just the other week we had (still do have) the issue of lifetime allowance protection, then along came partners state pension entitlement (the raison d'etre of this thread) and now, changes to the entire pension landscape.
Forgive the gratuitous link to my blog but this is a very fluid picture still. In the first instance, make sure you've at least considered earmarking or staking a claim for your allowances (ISA, pension etc) for this year. Once they've gone they've gone - the benefits of the pension in particular is potentially now far greater than it was a few days ago.
Lamborghini today, Lada tomorrow? - Echelon Wealthcare
But this budget affects everyone. Even a 70 year old who annuitised last week and who now must be distraught. Just the other week we had (still do have) the issue of lifetime allowance protection, then along came partners state pension entitlement (the raison d'etre of this thread) and now, changes to the entire pension landscape.
Forgive the gratuitous link to my blog but this is a very fluid picture still. In the first instance, make sure you've at least considered earmarking or staking a claim for your allowances (ISA, pension etc) for this year. Once they've gone they've gone - the benefits of the pension in particular is potentially now far greater than it was a few days ago.
Lamborghini today, Lada tomorrow? - Echelon Wealthcare
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Hi Al R,
Thank you for your excellent and informative posts on this site. Whilst I am conscious that you cannot offer advice, I would appreciate your thoughts on my “cunning plan” outlined below:
I am on the Professional Aviator (PA) Spine and AFPS 05, earning around £74K with 5 years to go to retirement at 55.
Scenario 1: If I see it out to 55, my pension on retirement should be around £35K. 12 years later, when I reach 67, this should rise to around £40K when the state pension kicks in. Shortfall between ages 55-67 of around £60K.
Scenario 2: Following the next SDSR, the gov’t turns my ac into beer cans and I am made redundant in ~2017. My initial EDP’s should be around £24K, rising to £25K when I reach 55 and £33K at 65. With the state pension at 67 bumping this up to £38K. Shortfall between ages 53-67 of around £168K!!
I also have ~10K in an FSAVC, contributed prior to joining the PA spine.
How much “headroom” do I have available to contribute to a DC pension during my last 5 years of service? Given the new pension flexibility outlined in the budget, I would plan to draw this money out in annual lumps to partly fill the shortfalls outlined above to top-up my pension income.
Does this sound like a reasonable plan and, if so, what sort of DC pension should I be looking at, a SIP, Stake Holder or resuming the FSAVC? In addition, would it improve my available headroom if I can start the pension before 5 Apr 14?
It may well be that I need to come to you for advice on a formal basis, however it would be helpful to first know if my plan is feasible or a non-starter.
Many thanks for your help,
T2D
PS: If my plan works, I may have to change my PPrune user name!
Thank you for your excellent and informative posts on this site. Whilst I am conscious that you cannot offer advice, I would appreciate your thoughts on my “cunning plan” outlined below:
I am on the Professional Aviator (PA) Spine and AFPS 05, earning around £74K with 5 years to go to retirement at 55.
Scenario 1: If I see it out to 55, my pension on retirement should be around £35K. 12 years later, when I reach 67, this should rise to around £40K when the state pension kicks in. Shortfall between ages 55-67 of around £60K.
Scenario 2: Following the next SDSR, the gov’t turns my ac into beer cans and I am made redundant in ~2017. My initial EDP’s should be around £24K, rising to £25K when I reach 55 and £33K at 65. With the state pension at 67 bumping this up to £38K. Shortfall between ages 53-67 of around £168K!!
I also have ~10K in an FSAVC, contributed prior to joining the PA spine.
How much “headroom” do I have available to contribute to a DC pension during my last 5 years of service? Given the new pension flexibility outlined in the budget, I would plan to draw this money out in annual lumps to partly fill the shortfalls outlined above to top-up my pension income.
Does this sound like a reasonable plan and, if so, what sort of DC pension should I be looking at, a SIP, Stake Holder or resuming the FSAVC? In addition, would it improve my available headroom if I can start the pension before 5 Apr 14?
It may well be that I need to come to you for advice on a formal basis, however it would be helpful to first know if my plan is feasible or a non-starter.
Many thanks for your help,
T2D
PS: If my plan works, I may have to change my PPrune user name!
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If being able to transfer out responsibly, rationally, fairly and in light of all the facts is the fair and right thing to do and allow, let it be fair for all. But it won't be - because although the government is minded to allow the transferring out of funded defined benefit schemes, it won't extend that ability to unfunded schemes, such as AFPS.
This isn't about the rights and wrongs of the suitability of specific advice, it's pure and simply subordinating the rights of servicemen to say, policemen or nurses in a similar scheme and The Treasury. Never let it be said anymore, that AFPS is still a 'free' scheme. It comes at a price, and that price is restriction and fewer options.
The default setting is always to do nothing, not to transfer - and rightly so. But there are plenty of people who do stand to be potentially advantaged by leaving deferred membership of AFPS. Also, if you're in retirement, your annual pension contribution allowance is going to drop to £10,000 per annum, from £40,000.
https://www.gov.uk/government/upload...al_WMS__C_.pdf
https://www.gov.uk/government/news/p...ou-should-know
This isn't about the rights and wrongs of the suitability of specific advice, it's pure and simply subordinating the rights of servicemen to say, policemen or nurses in a similar scheme and The Treasury. Never let it be said anymore, that AFPS is still a 'free' scheme. It comes at a price, and that price is restriction and fewer options.
The default setting is always to do nothing, not to transfer - and rightly so. But there are plenty of people who do stand to be potentially advantaged by leaving deferred membership of AFPS. Also, if you're in retirement, your annual pension contribution allowance is going to drop to £10,000 per annum, from £40,000.
https://www.gov.uk/government/upload...al_WMS__C_.pdf
https://www.gov.uk/government/news/p...ou-should-know
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Al R,
"Also, if you're in retirement, your annual pension contribution allowance is going to drop to £10,000 per annum, from £40,000."
When was that announced Al, and when is that going to start?
"Also, if you're in retirement, your annual pension contribution allowance is going to drop to £10,000 per annum, from £40,000."
When was that announced Al, and when is that going to start?
IMO, the Service pension will suffer badly here from future disparity and IMPOSSIBLE interchangeability with other pensions. How can they reduce the value AND reduce the flexibility at the same time!? Beats me who would want to join!
OAP
OAP
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LFFC,
It could be bought in at any time. Realistically, it'll be confirmed in Autumn and introduced next April (don't hold me to that!).
Otherwise, those who have made large singular contributions in this tax year will be penalised. It's to prevent retirees 'churning' pension income - a much more seductive and simpler thing to do post budget.
OAP,
The issue is, what real, adjusted value is 'free' membership of a so called non contributory final salary pension scheme if anyone else in the funded public sector or anyone who has a deferred funded final salary scheme, can take benefits at 55 with so much more flexibility.. and not 60/65 or so?
It puts it into context.
It could be bought in at any time. Realistically, it'll be confirmed in Autumn and introduced next April (don't hold me to that!).
Otherwise, those who have made large singular contributions in this tax year will be penalised. It's to prevent retirees 'churning' pension income - a much more seductive and simpler thing to do post budget.
OAP,
The issue is, what real, adjusted value is 'free' membership of a so called non contributory final salary pension scheme if anyone else in the funded public sector or anyone who has a deferred funded final salary scheme, can take benefits at 55 with so much more flexibility.. and not 60/65 or so?
It puts it into context.
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This, from the Observer overnight explains why advice surrounding transferring out of DB schemes is so risky - because there are cowboys out there quite happy to take the money and run (I dread to think how many ex mil ex pats are now sitting on absolute shockers of bought out pensions in Dhofar, Limassol, Kowloon etc).
It isn't always bad advice though, transferring out isn't always wrong - prescriptively and dogmatically telling people what is best for them without going through the exacting detail is, in my eyes, just as bad as churning business at a client's expense and to his/her detriment. But the default option has to be 'non!' at outset.
Pension transfers: could you be due compensation? | Money Observer
No one likes compensation cowboys and their radio ads, unless you're a compensation cowboy or an ad salesman. But if you were poorly advised by a company trading under the auspices of the UK regulatory authority, and if you were poorly advised, it might be that they're going to be sending you a letter!
Either way, it might just be worth dropping them a line with your current address..
It isn't always bad advice though, transferring out isn't always wrong - prescriptively and dogmatically telling people what is best for them without going through the exacting detail is, in my eyes, just as bad as churning business at a client's expense and to his/her detriment. But the default option has to be 'non!' at outset.
Pension transfers: could you be due compensation? | Money Observer
No one likes compensation cowboys and their radio ads, unless you're a compensation cowboy or an ad salesman. But if you were poorly advised by a company trading under the auspices of the UK regulatory authority, and if you were poorly advised, it might be that they're going to be sending you a letter!
Either way, it might just be worth dropping them a line with your current address..
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LFFC,
Further to your last, the new guidance will aply from April 15 - confirmed. It was decided that reducing the annual allowance from to £10,000 would reduce the risk of people recycling tax-free lump sum and reinvesting it into a new pension to receive fresh tax relief. Poor excuse really, the state wants money in the system sloshing about, simple.
The nice part is that (typically) low tax paying spouses/civil partners will be exempt - the new limit will only apply if an individual accesses a defined contribution pension worth more than £10,000. Therefore, anyone can make withdrawals from three small personal pots and unlimited small occupational pots worth less than £10,000 without being subject to the £10,000 annual allowance on further contributions. Perfect if you have time to plan ahead.
Thereafter, it changes a little. Anyone currently in flexible drawdown (ie; with no annual allowance and who have secured a £20,000 a year minimum income, in other words, most military career officers/WOs etc) will also be subject to the new £10,000 limit in April 2015. For individuals in capped drawdown though, the new £10,000 annual allowance will only apply when a saver withdraws more than their capped amount. The government said it would be 'unfair' to apply the £10,000 annual allowance to this group who did not know they would be subject to the rule when they entered capped drawdown.
It's going to be carnage. Savers won't have a clue and pension providers will struggle to establish what level of annual allowance applies in some cases, if there are pots all over the place.
On another note, it seems that savers with money in all DB schemes including AFPS but with only a small fund will be allowed flexibility in how they draw it. This might help those who served only a few years and who find themselves in aged financial misery and unable to access their money in a way that will help them most. That can only be a good thing - there's not much dignity in having a 'gold plated' pension when you have to cuddle a kettle to keep warm.
Further to your last, the new guidance will aply from April 15 - confirmed. It was decided that reducing the annual allowance from to £10,000 would reduce the risk of people recycling tax-free lump sum and reinvesting it into a new pension to receive fresh tax relief. Poor excuse really, the state wants money in the system sloshing about, simple.
The nice part is that (typically) low tax paying spouses/civil partners will be exempt - the new limit will only apply if an individual accesses a defined contribution pension worth more than £10,000. Therefore, anyone can make withdrawals from three small personal pots and unlimited small occupational pots worth less than £10,000 without being subject to the £10,000 annual allowance on further contributions. Perfect if you have time to plan ahead.
Thereafter, it changes a little. Anyone currently in flexible drawdown (ie; with no annual allowance and who have secured a £20,000 a year minimum income, in other words, most military career officers/WOs etc) will also be subject to the new £10,000 limit in April 2015. For individuals in capped drawdown though, the new £10,000 annual allowance will only apply when a saver withdraws more than their capped amount. The government said it would be 'unfair' to apply the £10,000 annual allowance to this group who did not know they would be subject to the rule when they entered capped drawdown.
It's going to be carnage. Savers won't have a clue and pension providers will struggle to establish what level of annual allowance applies in some cases, if there are pots all over the place.
On another note, it seems that savers with money in all DB schemes including AFPS but with only a small fund will be allowed flexibility in how they draw it. This might help those who served only a few years and who find themselves in aged financial misery and unable to access their money in a way that will help them most. That can only be a good thing - there's not much dignity in having a 'gold plated' pension when you have to cuddle a kettle to keep warm.