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Pension Freedom but proceed with caution

 

Almost every weekend the financial pages of the weekend newspapers carry a story about Pension Freedom. The message seems to be that once the changes come in next April, subject to approval, everyone will be able to access their pension pot to spend how they please.

 

They say that there will be no place for annuities in the future.  I strongly disagree with this.

Firstly, the new rules will not be available to employees who are in their company Final Salary Scheme.

 

For those who have the option, they will need to consider how they are going to survive financially in retirement if they take their pension pot and blow it.

 

A lot of the clients that I see who are approaching retirement want to be able to secure a guaranteed pension in their retirement and the best way to do this is using an annuity.

Sure, there are people with large pension funds and it may suit them to use part of the fund for an annuity and then access the remainder to use as they please.

 

People need to remember that the pension pot will not be tax free. You can currently take 25% as tax free cash and this will continue.  But the remaining 75% will be taxed at your marginal rate, meaning you could pay tax up to 40% on a large pot.

 

So what does this mean?

 

Let’s look at a pension fund of £100,000, as an example. The first £25,000 will be tax free, leaving you with £75,000 that will be classed as income.

 

Assuming your only other income is a state pension of say, £5,500 p.a., after you had paid tax, the £75,000 would reduce to £53,357. You would not be able to invest this and get an income that would match an annuity.

 

So the choice may be there in the future, but think carefully and take advice before running off with the cash.

‘Wills 4 Hospice’ a HUGE Success with nearly £10,000 raised for St Mary’s Hospice, Ulverston, Cumbria

 

Picture shows l-r Elaine Close, Community Fund Raiser, St Mary's Hospice with Poole Townsend solicitors Jamie Williams, Joanne Grisdale and Liz Redmong enjoying a well earned 'thank you' cream tea.

 

Residents’ of Barrow, Dalton, Ulverston and the surrounding villages showed their support for St Mary’s Hospice by kindly donating £9,700 instead of paying for a Will during Poole Townsend’s Wills 4 Hospice Campaign.

 

The Wills 4 Hospice Campaign was launched at the end of March and took place throughout the month of April.  So great was the demand that the campaign had to be extended to cater for the high demand. 

 

Instead of paying Poole Townsend for a Will, clients were asked to make a voluntary donation to St Mary’s Hospice.  In total, over 100 Wills were draw up during the campaign, amounting to £9,700 being raised.

 

Jamie Williams, Solicitor, Poole Townsend comments:  “It is staggering but not surprising that so many people in our area didn’t have a Will.  The majority of people we saw during the campaign had never had a Will before. 

 

“I cannot stress enough the importance of having a properly drawn up Will.  A straight forward Will is not as expensive as you may think and for peace of mind you need to be sure you have everything in place to pass onto your children and loved ones”. 

 

Liz Redmond, Solicitor, Poole Townsend, adds:  “We were very happy to support such a worthwhile local charity. Instead of paying our fee, we suggested an appropriate level of donation to clients and we were astounded with the generosity that was shown”. 

Although the campaign has now finished, if you need to make a Will, turn to Poole Townsend’s team of specialist solicitors to help put your affairs in order.  

 

To book an appointment, please call Poole Townsend on:  (01229) 811811.

Take a look at what SLPR

is up to this month ...

Great News for Home Buyers

 

The Chancellor of the Exchequer, George Osborne’s announcement on 3rd December regarding stamp duty is a welcome boost to the housing market and as he stated to 98% of people who pay it. 

 

Changing the way tax is calculated will ensure more house purchasers will save money on stamp duty.  The old slab system has been abolished and purchasers will now pay a fairer tax duty.

 

Angela Cornthwaite, Head of Property, Poole Townsend, comments:  “This really is fantastic news for the property market and will result in a much fairer tax system.  Rather than stamp duty being calculated on the whole purchase price it will now be calculated in stages.  Under the old rules you paid tax at a single rate on the entire property price, now you will only pay the rate of tax on the part of the property price within each tax band. 

 

For example a purchase price of £270,000 - under the old stamp duty system would have been £8,100. Under the new system it would be £3,500, a saving of £4,600 (2% on first £250,000 - £2,500 and 5% on the difference between £250,000 - £270,000 - £1,000) 

 

This will help remove the stumbling blocks agents encounter when they have a property around the threshold values”.

 

The 2% rate up to £250,000 will be the rate the majority of properties in our area fall into and so will save purchasers money as per the example above.

 

www.gov.uk/government/publications/stamp-duty-reforms-factsheet for further guidance notes on stamp duty.

 

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