By giving people greater control over their long-term finances, the government is sending a strong message of support in favour of people saving more for the future, especially when you look at the Isa changes.
Providing better flexibility to allocate Isa capital as savers see fit – between cash and investments without restriction – allows people to begin engaging with their finances in a more direct way. Few people begin saving with the help of an adviser, so providing the tools, flexibility and education in order to engage first-time savers has to be the way forward in securing the financial wellbeing of future generations.
James Priday is director at Prydis Wealth and founder of Strawberry Invest
PENSION CHANGES: WHAT IS HAPPENING?
In the 2014 Budget statement chancellor George Osborne announced an overhaul of the existing pension system. These changes included:
From March 27 2014
– The amount of overall pension wealth you can take as a lump sum rose from £18,000 to £30,000.
– The amount of guaranteed income needed in retirement to access flexible drawdown was reduced from £20,000 a year to £12,000 a year.
– The maximum amount you can take out each year from a capped drawdown arrangement was increased from 120 per cent to 150 per cent of an equivalent annuity.
– The size of a small pension pot that you can take as a lump sum, regardless of your total pension wealth, rose from £2,000 to £10,000.
– The number of personal pension pots you can take as a lump sum under the small pot rules, increased from two to three.
From April 2015 (subject to consultation):
The government states: “From age 55, whatever the size of a person’s defined-contribution pension pot, we propose that they’ll be able to take it how they want, subject to their marginal rate of income tax in that year. 25 per cent of their pot will remain tax-free.”
“People who continue to want the security of annuities will be able to purchase one and people who want greater control over their finances can drawdown their pensions as they see fit. Those who want to keep their pensions invested and drawdown from it over time will be able to do so.”
Source: HMRC
