Make the most of pension changes
PUBLISHED: 14:01 27 April 2006 | UPDATED: 13:23 04 May 2010
Rosemary Langley, private banking manager, Lloyds TSB Private Banking in Cambridge explains the changes to pension rules On April 6 - A-day - a new set of pension rules were introduced. The new rules will replace much of the existing pension legislation
Rosemary Langley, private banking manager, Lloyds TSB Private Banking in Cambridge explains the changes to pension rules
On April 6 - A-day - a new set of pension rules were introduced.
The new rules will replace much of the existing pension legislation and are intended to make the system simpler and more accessible for everybody.
If you want to be a member of a company pension scheme and save money in a personal pension at the same time, you can.
If you want to start drawing your pension and carrying on working, then that's going to be possible too.
Further changes include being able to take up to a quarter of your personal pension tax free at age 50 rising to 55 by 2010.
Research conducted by Lloyds TSB Private Banking showed that 52 per cent of people aged 45-54 intend to take this tax free cash when it becomes available to them and continue working full time, 22 per cent intend to take the money and work part time, while 12 per cent intend to take the money and give up work altogether.
For some people, 25 per cent of their pension fund could be quite a significant amount of money, and over a third (35 per cent) say that they might use the money to go travelling, while 33 per cent intend to do the sensible thing and pay off their mortgage.
For those with children, 21 per cent intend to help them get on to the property ladder, while 18 per cent intend to set the cash aside for their children's inheritance.
Reinvesting the money is fairly low on the priority list of those surveyed with only 19 per cent of those aged between 45 and 54 stating that investment is their intention.
Buying property, however, remains popular, with 17 per cent stating that they might buy a property abroad and 13 per cent considering buying a second home in the UK.
You also now have more choice about when, how and how much you save into a pension.
The limits on what you can put in and what you can take out have also been simplified. You can invest up to 100 per cent of your earned income in any tax year, up to a ceiling of £215,000 and receive tax relief at your highest marginal rate.
The reality is that most people will probably benefit from reviewing their current pension arrangements in light of the new rules to ensure that they are making the most of the changes, especially those people coming up to their 50th birthday.