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de Mellow & Co Wealth Management - A View of the Financial Landscape

  • Author: Chris de Mellow
  • Published: 2nd July 2015
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July 2015 - Chris de Mellow gives his view on “what retirement looks like in 2015"      

On 21 July 2014, the government released their response to the ‘Freedom and Choice in Pensions’ consultation, effectively giving the go-ahead for the sweeping pension changes that were proposed as part of the 2014 Budget in March. These changes could radically alter your plans for retirement.

From April 2015, we will see more freedom in ways people can take their pension benefits when they reach 55. Few would vote against choice and flexibility for their pension, but what do the changes mean if you are planning your retirement? Here we give you five areas for consideration.

More freedom in how you draw your income

In theory, the flexibility will allow you to treat your pension fund in the same way as any other investment: you will be able to take withdrawals whenever you want.

From April 2015, if you are a member of a defined contribution pension scheme and aged 55 or over, you will be able to draw money from it as you see fit. You can receive a tax free cash sum of up to 25% of the amount you take, then you will have the freedom to access some or all of the remaining fund as income, taxable at your marginal rate of income tax. So if you want to access all of the money from your pension, you will be able to take it as a lump sum.

As tempting as it sounds to get hold of your money when you want it, in practice, the tax treatment may discourage you from extracting large sums in a single year. So unless you really need the extra income, you may want to withdraw your pension savings at a slower rate that is more tax-efficient.

Although the new pension freedoms mean you will no longer be compelled to buy an annuity, if you are looking to secure a guaranteed income for the rest of your life, an annuity will still be an appropriate option for you, especially as it’s impossible to tell how long you will live.

Changes to how much you can contribute

From April 2015, if you are drawing an income from your pension (after taking tax free cash) and wish to make contributions to a defined contribution scheme, you can continue to do so, but the amount on which you can receive tax relief (the ‘Annual Allowance’) will be cut from £40,000 to £10,000 a year. This could be via employer or personal contributions.

The £10,000 Annual Allowance will be introduced for those already in ‘flexible drawdown’. This provides a potential advantage as the existing rules prohibit tax-relievable contributions if you are already taking income from Flexible Drawdown.

In some circumstances the Annual Allowance will not apply, but the rules can be complex. For example, you will be able to take income from a maximum of three smaller personal pension pots, or an unlimited number of smaller occupational pension pots (in both cases, worth less than £10,000), without being subject to the Annual Allowance restriction. Similarly, if you enter Capped Drawdown before April 2015 and take income within your income limit after this date, the Annual Allowance will remain at £40,000 a year in these cases.

If you would like to read more click here.

To download a Microsoft Word document click here.

To receive a complimentary guide covering Wealth Management, Retirement planning or Inheritance Tax planning, produced by St. James’s Place Wealth Management, contact Chris de Mellow of  de Mellow & Co Wealth Management on 02392 595922 or email

Or visit their page here -

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de Mellow & Co Wealth Management - A View of the Financial Landscape

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