Tag Archives: Budget

Pensions – Good News And Bad News

Pension Tax

Over the last few years the Chancellor George Osborne has created a pension revolution that has been welcomed with open arms.  He has introduced freedoms that allow pensions to be accessed easily or passed down the generations free of inheritance tax. Higher and additional rate taxpayers continue to receive tax relief on contributions at 40% and 45%.

So what next? From April 2016 new regulations will be introduced restricting the amount high earners can pay into pensions to £10,000. And there is speculation that George is looking to further restrict the current tax relief system by introducing a flat rate of tax relief, possibly 25%, rather than the current system of claiming tax relief at the marginal rate.

We don’t know what the Chancellor will say on Budget Day but the advice is clear. Higher rate taxpayers planning on making pension contributions should do so before 16th March to make sure they maximise their tax reliefs and planning opportunities. And if cash flow is an issue, think about switching some ISAs or speaking to your friendly bank manager – it’s too good an opportunity to miss.

For help planning your retirement contact Tony Brierley (tony.brierley@pmm.co.uk), Antony Keen (antony.keen@pmm.co.uk) or Richard Hesketh (richard.hesketh@pmm.co.uk) for further information.

PM+M Wealth Management Ltd is authorised and regulated by the Financial Conduct Authority.

The Queen’s Speech

shutterstock_114857485Last week at the state opening of Parliament 2015, the Queen made her speech outlining the proposed legislation of the new government.

As expected an EU referendum by 2017 is on the agenda along with free childcare, an income tax freeze and the extension of the right to buy scheme for housing association tenants. There are also a number of bills that have been proposed.

The Enterprise Bill will incorporate measures to reduce regulation on small businesses and help them develop, in a bid to boost job creation. The Enterprise Bill will also contain measures to create a conciliation service, to help settle disputes over late payment practices between small and large businesses. There are also plans in place to improve the business rates system ahead of 2017.

There were various tax pledges made by the Conservatives during the General Election and they are set to keep their promises in the Finance Bill as the Queen announced that there would be no rise in income tax rates, VAT or national insurance before 2020. It was also announced that anybody working 30 hours on the minimum wage or anybody earning below £12,500 will not have to pay any income tax.

Jane Parry, Managing Partner and Head of Tax at PM+M, says “The follow up on election promises is welcomed but, interestingly, there was no mention in the Queen’s speech of the proposed inheritance tax relief for houses passed down in the family.  Hopefully it will appear in the Budget speech on 8 July.”

In his second Budget speech of the year, George Osborne will reveal the Government plans to cut £12bn from the UK’s welfare bill, as well as hopefully firming up on his tax proposals. Nothing substantially damaging to businesses is expected to be announced but, as always, there could be a few curve balls in the Chancellor’s announcements regarding measures to clamp down on tax avoidance. This budget should provide some clarity on what will happen to the Business Annual Investment allowance from 1 January, as the Chancellor was keen to avoid giving a commitment on this in his first Budget speech.

To find out what this means for you and your business, we would like to invite you to our post-election Budget breakfast seminar on Thursday 9 July.

For more information about our free seminar or to book, please click the button below or call Daniel Hill on 01254 679131.

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Pensions your flexible new friend!

In the recent Budget, George Osborne finally achieved something that has eluded many Chancellors over the years.  He managed to simplify the rules surrounding pensions and, dare we say, even make pensions interesting! (In the same way Steve Davies made snooker interesting!)

From April 2015 gone is the requirement to purchase an annuity and the restrictions on how much you can withdraw from your pension fund.  The Government has recognised that in order to encourage people to save for their future, greater flexibility is required.

The tax free cash element remains the same and you can still take up to 25% of your fund value as a tax free lump sum.  The remaining fund can be withdrawn whenever you wish and is taxable at your marginal rate.

What’s the catch?  The price for savers will be that access to their pension pots will be pushed back, at the same pace as the State Retirement Age.  Initially it will move from 55 to age 57 in 2028. This could affect those around age 40 and under.

These new rules apply only to those who have money purchase arrangements and who have not already used their entire fund to purchase an annuity.  Whilst the new rules undoubtedly provide greater flexibility, care will need to be taken to make sure you have sufficient assets to last throughout your retirement.  Holistic and cash flow planning has never been more important and advice should be sought to make sure you maximise your investment returns and minimise the tax payable.

The main pension points from the budget are:

Transitional arrangements from 27 March 2014

  • Capped drawdown increased from 120% GAD to 150% GAD. This is the maximum level of income that can be taken.  The rates are based on tables issued by the Government Actuary’s Department (GAD) which equate very approximately to single life annuity rates.
  • Flexible drawdown guaranteed income requirement reduced from £20,000 to £12,000 – that is providing you have a guaranteed income of £12,000 per annum you can draw whatever level of income you like from your pension fund.
  • The limit for trivial commutation for small funds increases from £18,000 to £30,000.  For these small pension pots you can take 25% tax free and pay tax on the balance at your marginal rate.
  • 25% tax free cash is staying.

From April 2015

  • 25% tax free cash remains
  • From April 2015 if aged 55 or over you can take benefits how you wish.  You could take your whole pension fund in one go as income drawdown if you wish, subject to paying your marginal rate of income tax.

Future proposals

  • The age at which you can access your pension will increase from 55 to 57 in 2028 (at this point State Pension age is increased to 67).  In future, this minimum age will increase in line with State Pension age.
  • The tax charge on funds remaining in your pension scheme when you die is to be reviewed.  The Government believes 55% is too high.  Details will be announced after a period of consultation.
  • The Annual Allowance governing how much you can put into your pension is reduced from £50,000 to £40,000, as previously planned.
  • It will still be possible to carry forward any unused annual allowances from the previous three years.
  • Lifetime Allowance still reduced to £1.25m.
  • Intention to introduce legislation to remove option to transfer from public service defined benefit schemes (except in very limited circumstances).

For further details or to discuss your retirement planning please contact Antony Keen, Tony Brierley or Richard Hesketh.