Hooray for a pension free budget, drinks at the Citizen M and a new website!

The 7th floor bar at Citizen M, Tower Hill.  Not a bad spot to do your pensions homework

The 7th floor bar at Citizen M, Tower Hill. Not a bad spot to do your pensions homework

Happy Saturday everyone.  We’re up early in Cornwall. Twin 2 is watching Postman Pat – who seems (literally) to have gone up in the world since I was a kid and now has a suite of vehicles including a helicopter – and twin 1 is asleep.  A good time to get back on line and post my first “post twin” blog.  I was relying on #spreadsheetphil coming up with the goods on Wednesday and giving me something meaty about pensions to blog about – but no such luck.  With the exception of a promise to clamp down on overseas pension arrangements this years’ Budget was pensions free!  Hooray, is my response.  This is a very, very good thing.

My stock answer for years when asked by journalists what I hoped for regarding pensions in previous Budgets was “nothing”.  My view for a long time has been that the Government has tinkered and teased our pensions system to the point of public confusion and what the UK desperately needs now is a period of stability within the pensions industry in order to build public confidence and for us, the pensions professionals, to deliver some badly needed education about pensions – with some hope that what we teach will remaining relevant for longer than 12 months.

So could this be the end of a long era of the Government medling with pensions?  Before my mat’ leave began not a day seemed to go by without pensions being in the press and something either being changed, proposed or reported as miss-sold.  Fast forward and things do seem to have quietened down a little, thank goodness.  This is bad news for consultants but great news for members of pension schemes and companies that need to focus on their core business as opposed to understanding and complying with the latest round of pensions changes.

I’m formally back to work after Easter but am doing a number of “Keeping in Touch Days” at the moment, which are an absolutely brilliant concept and a massive help, particularly in a role which involves knowing what is going on in the world beyond what Postman Pat’s latest mode of transport is.

One of my KIT days involved a quick catch up with the king of all pension bloggers Henry Tapper who, over a nice cold drink in the fabulous 7th floor bar at the Citizen M hotel, Tower Hill, summarised what I had missed whilst having the twins.  Put briefly, “a pop at independence in the investment world” and “a paper on final salary pensions which claims the problem with DB can’t be cured over night” are the two big headlines.  Neither are ground breaking.

So, on to pastures new.

A huge shout out to the wonderful Ally Toulec for dragging me up to date with modern day blogging practises, teaching me about Instagram, which I have exciting plans for (watch this space) and helping me update my website which I think is all looking a little bit smarter.

 

Tempting? Maybe, but is it better than an income for life?

BoatSo, apparently 1 in 6 people are planning to take their pension as a single cash lump sum. In case you don’t know, if you are over age 55 on 6 April 2015 you could draw out your whole pension pot as cash.

Tempting? Yes.  Especially as the average UK pension pot is worth around £30k which could go a long way towards a nice holiday, new car or paying off that mortgage or credit card.

BUT…before you bite the bullet there are some things that you need to know,  Here’s the lowdown on taking that cash.

  1. MOST IMPORTANTLY: THIS CASH IS YOUR PENSION which has to last you for the rest of your life (unless you have other wealth).  Ask yourself, “do I really need all of it now?”.
  2. You will probably need to pay tax on part of any cash you withdraw.
  3. If you do pay tax, the first 25p in every £1 you withdraw will be tax free.
  4. Any tax you have to pay on the remainder will be at your marginal rate.
  5. If you don’t spend all the cash you will need to think about where to invest it, the return it could earn and tax you will pay.
  6. If you don’t take cash from your pension then it will carry on being invested with interest growing tax free, like an ISA.

So, before you book that world cruise or order the new kitchen, just think about the implications.

Happy saving!