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Pensions A Day Again!

STOP PRESS

In the November pre-budget statement, the Chancellor Gordon Brown announced a major revision to the investment options available under Self Invested Pension Plans (SIPPs). Residential property will NOT now be an eligible asset. A pension fund holding residential property, or tangible items such as fine wines, vintage cars or art works will attract punitive tax penalties on the pension holder, and the fund itself.

This is a significant and (effectively last-minute) reversal on the developing proposals. Commercial property investment, however, remains a legitimate pension fund investment.
15/12/2005

Pension changes come closer

Now seemed a good time to highlight some of the changes to pensions coming our way on 6th April 2006. We’ve highlighted some key changes that provide plenty of food for thought.

  • You will be able to stay in full employment and still start to draw occupational pension benefits – there will be no need to actually “retire”.
  • You will be able to take your tax free cash - 25% of your fund - (if over 50) and put off taking any income at all until later. You can even continue to contribute to a pension and gain tax relief on the contributions subject to the new limits.
  • From 2010 the age at which you can take benefits will rise, to 55, from 50, although benefits in payment can continue. If you are on the cusp, age-wise, you may want to review your plans.
  • Residential property can be held by your pension fund via a SIPP. Those of you with “buy-to-let” second homes may want to consider the pros and cons of either by selling it to your pension fund, or using it as an “in specie” pension contribution. Or you might consider using an existing pension fund to acquire further property.
  • If you’re about to buy an annuity with your pension fund before April, take advice before committing yourself! There will be new annuity options available next year, as well as the “unsecured income” alternative; but there will be nothing that can be done to alter a conventional annuity already in payment.

A leading industry commentator noted that this latest round of pension legislation may well curtail the tax avoidance activities of the “Fat Cats”, but has also heralded the age of the “Chubby Cats”. For the middle income and asset owning groups, there is plenty of fresh opportunity to enhance their financial positions by the creative use of the new provisions, exploiting legitimate tax reliefs and to building robust tax shelters.
29/09/06

Major changes to pension rules on the way

From 6th April 2006, (so-called Pension's A-Day) all the rules and regulations governing UK pensions will fundamentally change. Currently, there are effectively three main strands of rules, each with unique features; those for Personal Pensions, those for Retirement Annuity Contracts, and those for members of Occupational Schemes. With effect from A-Day just one set of rules will apply to all UK pensions and pension schemes, to schemes existing as at A-Day, as well as to any new ones.

The proposed changes could affect anyone with existing pension funds, and there are a number of pitfalls to look out for. Those currently with benefits under Occupational Rules especially need to check if they will see a reduction in the proportion of the fund they can take as tax free cash. There are strategies to maximise the opportunities and minimise the disadvantages of the impending new regime, but some will only work if action is taken before A-Day, and for some it may actually be better to delay a course of action until after. So, everyone would be well advised to review their arrangements sooner rather than later.
11/08/04

Asset rich, cash poor

For many in retirement the prospect of releasing capital from the value of their home to supplement income can seem attractive. It is, though a complex area, and one not to be entered into lightly.

At Matthews Financial we were therefore pleased to note that both forms of "equity release", lifetime mortgages and home reversions, are to be fully regulated by the Financial Services Authority. Originally, it was proposed that only lifetime mortgages would fall under the aegis of the FSA when it assumes full regulatory responsibility for residential mortgage lending in October. That could have seen home reversions being marketed and arranged with far less protection for the consumer, and even promoted without any consideration of whether a lifetime mortgage might be a more appropriate option. With a total of £1.2 billion advanced in 2003 under equity release schemes - a figure expected to rise this year and next - anything that helps to promote a robust and professional advisory framework is, in our view, to be welcomed.
07/07/04