You save your whole life and then you want to retire. You want to now spend all the money that you have put into your pensions for all these years. For 28 years I have been telling clients that your pension fund is actually not your money; if it was your money, you could just go out and spend it all couldn’t you. Well you can’t. Only 25% is truly yours and the rest is in a trust. You can only spend a set amount, a set amount deemed sensible by some Treasury Mandarin who hasn’t got a pension at all similar to yours.
The Pensions Freedom Bill
In a few short weeks now all that changes. From 6th April The “We know best” period finishes and you can for the first time spend your pension pot at the rate you decide. Of course there is the question of income tax on what you draw out, but you had tax-relief on what you invested. You should end up no worse than even.
Why Change Now?
These changes have come about because of this coalition government. Steve Webb the pensions minister, actually the longest serving pension minister since the job was created, just got stuck in and brought about change. Unfortunately he is about to lose his job. As a Lib Dem he has little chance of retaining his role after the next general election in May. However there is broad cross party support and the next pension minister is likely to be a short term lazy journeyman who changes nothing.
So big changes to come for every client with a pension fund over the age of 55. You will be hearing from us in the new tax year.