With the festive season and 2015 fast approaching, it is essential that we recognise the fact that as a result of the 2014 Budget, enhanced by the recent Chancellor’s Autumn Statement, pension schemes are reinforced as the most flexible and tax efficient savings method for an individual and for those who benefit on his/her death.
The governing legislation for the new changes is contained in the Taxation of Pensions Bill which is currently before Parliament. This is intended to be enacted early in 2015 and scheduled to come into effect on 6th April 2015.
The principle changes that are being introduced can be summarised as follows:
- Additional drawing flexibility for members of SASS, SIPPs and some other money purchase pension schemes with unrestricted access to all funds – subject to income tax.
- Reductions in the tax on death benefits from such schemes including a fall to zero tax in some circumstances.
- Considerably increased flexibility in distributing death benefits, including the new option of leaving a continuing tax exempt pension fund to all desired beneficiaries, and not just to “financial dependants.”
- The chance to pay pension contributions when in Flexible Drawdown, but reduced maximum contributions in drawdown, where this commences after 5th April 2015.
I am sure you will recognise that there is an urgent need for detailed pension and financial planning before April 2015 for consideration and including:
a) Whether to draw tax free cash early
b) Whether to defer the payment of death benefits until after 5th April 2015 and in such cases how the death benefits are paid and to whom.
Once you have had the opportunity of digesting this post, please revert to me in order that we can make arrangements to meet well before the 5th April 2015.
Wishing you compliments of the season, and best wishes for a happy, healthy and prosperous New Year.
RICHARD KAFTON