19 March 2014

Budget 2014 - Key Points for those Retiring / Retired

Well we didn't expect such a pensions-and-savings orientated Budget! There are a number of important points so I thought it important to highlight those, even while many in financial services (me included!) are scratching our heads over the details. My initial reaction to each [is in brackets]

Warning: more details (and even corrections) may be forthcoming over the next few days as the detailed Budget documents are studied.

The most important bits...

  • Those with total pension pot of £30,000 or less will be able to take it all (currently £18,000), while those with up to three individual pension pots of less than £10,000 can do the same (currently up to two of less than £2,000) [Comment: Hmmm, *see below]
  • Over 55's with their own pension money could be offered free impartial advice on taking pension benefits - consultation to be conducted on how this will be delivered [Comment: definitely a good thing, although how?]
  • For consultation: Anyone can withdraw their whole pension i.e. no need to buy an annuity [Comment: VERY dangerous - so what happens when that money has been spent on a few holidays at the start of retirement? Call me old-fashioned but sometimes people need protecting from themselves. For those who are prudent with their money it provides a great opportunity for tax-efficient financial planning]
  • From 1st July there will be no separation between Cash ISAs and Stocks & Shares ISAs and the allowance will be increased significantly [Comment: a good simplification and a worthwhile new limit]

  • "Flexible Drawdown" allows you to withdraw your pension money if you have a guaranteed pension income of £12,000 or more (currently £20,000) [Comment: dangerous - too easy to run out of money]
  • "Capped Drawdown" - current income limit increased [Comment: potentially dangerous - too easy to run out of money, but OK if knowledgeable or with advice]
  • From 2028 you will generally have to wait until age 57 to draw any benefits from a private pension (currently it's 55) [Comment: not a big deal for many, but a sensible increase]
  • Transfers from Defined Benefit to Defined Contribution pension schemes will be limited [Comment: mostly not a good thing anyway]
  • Tax allowances go up on 6th April to £10,500 (basic) and £41,865 (higher) [Comment: good]
  • Maximum Premium Bonds holding up to £40,000 in June (currently £30,000) [Comment: I recommend avoiding Premium Bonds anyway]
  • New "Pensioner Bond" from January from National Savings next year offering "market leading rates"
*It's all very well allowing pension flexibility, but my fear is that people will tend to take what they can as soon as possible, and run out of money very quickly and live in pension poverty for longer.

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