The
tax rules are to be changed to allow individuals aged 55 and over to access
their defined contribution pension as they wish from April 2015. As part of the
Taxation of Pensions Bill 2014, which was published in mid-October, the
government is proposing changes to the rules on taking pensions as a lump sum,
so that people will be able to take a series of lump sums instead of only one.
Under
the current tax rules, people who want to take their pension benefits would
take 25% of their pension pot free of tax and then place the other 75% in a
drawdown account or purchase an annuity. Any regular pension income they
receive from an annuity or drawdown account will be taxed at their marginal
rate.
Under
the new rules, individuals will have the ability to take a series of lump sums
from their pension fund, with 25% of each payment then free of tax and 75%
taxed at their marginal rate, without having to enter into a drawdown policy.
The March 2014 Budget introduced measures to allow retirees to spend their
pension pot as they choose rather than having to buy an annuity while, six
months later, it was announced people are to have the freedom to pass on their
unused defined contribution pension to any nominated beneficiary when
they die.
With
pensions saving clearly now a major focus for politicians and therefore in a
state of some flux, it is well worth considering seeking expert advice on your
individual circumstances.
Contact
us if you would like to speak to an adviser about your own pension planning.
AWP
UK interest rates have languished at an all-time low of 0.5% since March 2009 in a strategy designed to shore up the UK economy through the pain and the aftermath of the financial crisis and recession.
As the economy continues to show signs of sustained recovery, however, interest rates are now widely tipped to rise – and signs of dissent among Bank of England policymakers have fuelled speculation about the timing and scale of such an increase. The Bank’s governor Mark Carney has emphasised that increases – when they come – will be both “gradual and limited” and rates are not expected to reach their pre-recession heights.
The first increase in rates is widely expected to be announced during the first half of 2015 although Carney has stressed the Bank of England’s monetary policymakers have “no pre-set course”, adding: “Rates will go up only as far and as fast as is consistent with price stability as part of a durable expansion, with the maximum sustainable level of employment.” The labour market remains “central” to the Bank’s decisions. The rate of unemployment is forecast to decline to 5.5% over the next three years while earnings growth, which has failed to keep pace with increases in the cost of living, is expected to pick up. In particular, Bank of England policymakers intend to monitor pay settlements, which tend to cluster around the turn of the year, and real growth in wages is expected to resume around the middle of 2015.
The British Chambers of Commerce has urged the Bank of England not to act prematurely, cautioning that higher rates could undermine the UK’s economic recovery. Meanwhile, the Resolution Foundation think-tank has warned even a “relatively benign” increase in interest rates could lead to a surge in the number of UK households struggling with debt.
The Bank of England is likely to remain vigilant, fearing inflation could present problems if interest rate increases are not implemented “prudently”. The rate of inflation has remained below its government-set target of 2% since January 2014, reducing pressure on policymakers to increase interest rates. Looking ahead, the discussion and speculation appear likely to continue, fuelled by fresh releases of economic data and signals from policymakers.
Nevertheless, one thing looks relatively certain – an increase in UK interest rates would appear no longer a case of ‘if’ so much as ‘when’.
AWP
