14th October 2014
The Budget changed the face of retirement options for members of defined contribution (DC) schemes, with perhaps the most radical pension proposals of our lifetime. The new pension changes will come into force from April next year and remove many restrictions on how pension benefits can be taken from age 55.
There are a number of issues which need to be considered with a drastically changing pension landscape. Not least because employee behaviour and that of consumers generally is often flawed when making what for many will be the largest financial decision of their life. Over the last few years there have been a number of research projects and government consultations based on behavioural economics. Results show that in general DC members;
Don’t:
They do:
The Budget 2014 introduced a number of changes allowing people greater freedom with their retirement income. However, with choice and flexibility comes potential confusion and poor decision making. The key points which the new legislation will introduce include:
Flexi Access drawdown with:
In essence, a ‘do what you want when you want’ regime for pension savers age 55 and over.
The removal of restrictions on lifetime annuity payments:
Significant amendment to pensions ‘death taxes’:
The need for those transferring from Defined Benefit (DB) schemes to take advice from a regulated adviser independent of the scheme.
Uncrystallised funds pension lump sum introduced (UFPLS):
Jonathan Watts-Lay, Director, WEALTH at work comments, “Greater flexibility to decide how to take income from pension savings is fantastic news for savers, but without the right financial education and advice it could leave them incredibly vulnerable to making poor decisions.”
To talk to Jonathan about the pension changes, please leave your details below.
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