Divorcees at risk with pension reforms

As experienced independent financial advisors Enable in Bishop’s Stortford know resolving the finances after divorce can be a daunting task. Since the pension changes have come into effect this April there are concerns that thousands who thought their financial divorce was over could find themselves struggling when estranged spouses cash in policies to stop them being split evenly.

Lots of couples who divorced before the millennium signed an agreement to say that the income from a final salary pension would be shared in retirement, it was a process known as an ‘ear-marking order’ meaning a percentage of the income was ear-marked for the divorced spouse but the main earner retained control of the pension.  Divorcees who agreed to split a final salary pension pot belonging to their spouse could now find themselves penniless because of loopholes in the new pension rules, a loophole that could mean divorcees could intentionally cash in their life savings to deprive their former wives or husbands of an income in retirement.

Tom McPhail, head of pensions at investment firm Hargreaves Lansdown said: ‘This is an unintended consequence of the new pension rules. There may be restrictions on doing this but it would very much be up to the people running the scheme to decide how the rules are applied.’
Normally it is not advisable to take a final salary pension as a cash lump sum because of the huge benefits the regular income provides. Enable’s IFAs in Bishop’s Stortford can help talk through any issues relating to the new pension rules.

Issued by: Enable Independent Financial Life Planners 
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
 Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE

What should I do with my pension savings? Changes you need to know about

From next April, the chancellor wants you to be able to do what you like with your pension savings once you reach age 55, new rules mean if you want to spend your whole fund you can; if you want to take out a bit at a time, you can; if you want to use your pension fund like a bank account, you should be able to do so.

But you don’t have to do anything! Many people approaching retirement age will have personal pension plans started in the 1980s or 1990s. When setting up these funds, you would have been asked to select a retirement date and many would have chosen a birth date between 55 and 65.

About six months before your chosen pension age, the pension company will send out a 'wake-up pack', offering you an annuity. When you get this kind of pack, you may think you have to do something, but you don’t have to and if you are still working, or if you have other pension income, you may benefit from leaving the fund alone to earn extra tax-free investment returns, rather than buying a product, or transferring it or withdrawing the money.

In the past people have tended to believe they had to automatically buy an annuity or income drawdown product, but you don’t and there are lots of other thing you may want to do with your pension. The 'do nothing' option may still be a good one, Enables IFA’s in Bishop’s Stortford can help you with your retirement planning if you're not sure what's best.

Issued by: Enable Independent Financial Life Planners
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE

What would Labour do differently on pensions?

It’s the season of Party Politics and all this year’s conferences clearly have next year’s elections in their sights.  With such a shake up to the pension scheme this year it is hard to envisage swings back or in a different direction should we have a change of government but this is part of an Independent financial Advisors' role to keep on top of changes in legislation and how they might affect your savings and investments.

Some of the key changes the Labour Party raised with respect to pensions in their conference include  the idea that Labour would scrap the Government’s pot follows member scheme to stop the build-up of multiple small pension funds when people change jobs. As an alternative it prefers an aggregator model, where small pots are transferred to a central third-party scheme and then distributed. With respect to the Cap Charge the Department for Work and Pensions will be imposing a 0.75 per cent charge cap on all auto-enrolment schemes from next April. Labour says it would go further with a 0.5 per cent cap for schemes that wish to be eligible for transferring stranded pots.
Labour also said it would lift the £4,600 annual contribution limit and ban on transfers immediately if elected next year.

Enable of Bishop’s Stortford know that all three of the major parties will review tax relief, Labour is expected to reveal its proposals in its manifesto. Pensions minister Steve Webb, a Liberal Democrat, has proposed a new flat rate of less than 30 per cent while the Conservatives are considering further changes to the taxation of savings too.


Issued by: Enable Independent Financial Life Planners
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE

Pension tax relief reform with flat-rate below 30%

Enable's Independent Financial Advisors are often asked to clarify the tax relief position on pension contributions and drawdown.  Last month, the Centre for Policy Studies (CPS) published a report that set off the debate over the future of pensions tax relief again. The CPS policy paper argues that the system we have at the moment– where contributions and investment growth are tax-free but retirement income is taxed – is unfair and tends to benefit the wealthy.

The CPS think-tank says tax relief should be scrapped altogether and replaced by a Treasury contribution of 50p per £1 saved. This would be subject to an annual allowance of £8,000, with prior years’ unused allowance permitted to be rolled up over a period of up to 10 years.

Pension tax relief looks as if it will play a significant part in next years general elections and the implications need to be considered.

There are of course inherent difficulties for each political party to address  in reforming the pensions tax system, but it would seem that the overall  political consensus is beginning to suggest that the current rules need readjusting to make them fairer. Deciding just how, when and what is to be done is still unclear and is likely to generate a fair amount of debate over the next year.  If you want to talk thought how any of these possible changes might affect your pension saving plan Enable of Bishops Stortfords IFAs are happy to talk you though your saving for retirement options.


Issued by: Enable Independent Financial Life Planners
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE