The pension pot power is now in your hands!
First and foremost, we are business accountants for business people, but with the introduction of auto-enrolment, ‘Pensions’ are going to be a big concern for some business owners (for both them and their employees). In today’s blog we take a look at the Chancellors latest Budget update and the radically relaxed rules on when you can take your pension.
From April 2015, pensioners will be given more freedom with their retirement savings, with all restrictions on access to pension pots removed. At present savers can take 25% of their pension pot tax-free when they retire. This will remain in place, but the tax on withdrawing the rest of the cash will be cut, making it easier for people to use their entire fund as they wish.
On the one hand you will have complete freedom over the management of your retirement fund, but on the other hand you will be burdened by the responsibility and discipline of spending it wisely and making sure there is enough money left to cater for your living expenses.
According to the BBC, Pensions minister Steve Webb said "if people do buy a Lamborghini but know that they'll end up just living on the state pension, that becomes their choice".
The point he is making is that the money is yours; how you spend it is up to you. The big question is how do you get a pensioner into (and out of) a Lamborghini? And more importantly; what happens when the pensioner has spent all their savings?
We welcome your answers to both questions below.
Mark Jones | 01 April 2014
The question is not what happens but why have the Government taken a huge tax take and NO one seems to be on to it!They will benefit from an increase income tax that they would not normally have seen in an annuity world. In addition to this if retirees then go on to spend that money in the economy there is VAT and potential CGT and IHT gains that again the government will not have seen. Add to all of this the government are borrowing from retirees by way of pensioner bonds and we can safely say the retired generation are funding most of the capital projects for the current government in the run up to the 2015 election. Why has NO one talked about this?