People could be forgiven for switching off when news of changes in pension legislation hits the media. It’s certainly not the most interesting of subjects and of late it appears that rules change nearly as often as the weather. However, the latest raft of proposals have definitely favoured the plan holder - not the insurance companies and certainly not the tax man.
Changes in pension legislation earlier this year greatly increased the advantages of these long term saving vehicles. Newer additional changes have probably made saving via a pension the single most tax efficient method of accumulating a pot of money for future use. Nothing major has altered regarding the accumulation of benefits. These still receive an uplift via tax relief on contributions going in and also on the beneficial tax treatment of the underlying investments within the plan.
However, the major changes are on the removal of restrictions previously applied to certain methods of drawing benefits. The options are clearer, simpler and believe it or not fairer to the pension plan holder. In addition, harsh ‘death tax’ penalties that applied to certain forms of residual pension pots will either be reduced or removed completely from next April. Again this provides far greater flexibility and added value to the saver, who utilises all the benefits that pension plans can provide.
Cynics would argue that consecutive governments only make legislation changes to encourage people to make their own pension provision. As this potentially reduces the government burden of footing the bill for old age further down the line. I cannot argue with this point of view although I would look past the reasons for legislation change and just take full advantage of what’s on offer!
The real message is not legislation change or tax relief or even pensions for that matter, the real point I am trying to make is that on retirement people can easily live the next 20 years or more in very good health. It is at this stage of life with proper financial planning that these years can be some of the most enjoyable and fruitful of one’s life. Doing all the things you never had the time or money to do.
If you would like to speak to a qualified financial planner about planning for your future please don’t hesitate to get in touch.