Investors face an ‘overwhelming’ series of changes to pension legislation and must take proper advice in order to make correct decisions, a pension specialist has warned.
The warning comes as the Government announces legislation that will mean over-55s will have added flexibility to ‘do what they want with their money.’
The news means that from next year, those approaching retirement and pensioners will be able to access the whole of their pension fund (subject to income tax), rather than just being restricted to a 25% tax-free lump sum and annuity/drawdown.
This is one of a number of changes announced by the Government. Recent weeks have also seen the Chancellor unveil plans to scrap the current 55 % tax charge on lump sum pension benefits left to family members – known as the Death Tax.
The sweeping changes to the rules are set to come into force in April 2015, with further details to be given in the Chancellor’s Autumn Statement.
Emma Thomas of Ludlow Wealth Management Group, has welcomed the changes that are due to come into force as offering much-needed simplification for the pension system, but warned that investors could end up confused.
She said: “These recent announcements which are slowly being made public ahead of the Chancellor’s Autumn Statement are drawing significant attention to pensions.
“Ludlow has long advocated pensions as a convenient and tax efficient way of planning for the future, and a way to live life without worrying about the future.
“Recent figures from Nest, the Government’s default pension scheme, show that since businesses have been obliged to place employees into pension schemes, an extra 4.5 million people are saving towards their retirement which is great news.
“However, there is a danger that much of this new attention will mean people are overwhelmed by the recent changes and may rush into making decisions without a full understanding them.
“Many people may be tempted to take advantage of the newly relaxed rules, and indeed some in the profession have said it could create the perfect conditions for a mis-selling scandal.
“It’s important to seek professional advice before making a decision on such an important topic. Anybody with any uncertainties should contact their advisor for more information.”
If you are concerned about the upcoming changes to pensions, due to be introduced on April 6 this year, please contact our consultants on 01704 500324.