MONEY MATTERSGeorgina Kitteridge writes on
New Pensions and Bandits!Well it’s here. April that is and from the 6th we face the most far reaching changes in pension regulation since they began. You would not be alone in thinking that accessing your pension fund will now be as easy as withdrawing money from your bank account. But with a minefield of changes, it is not quite that simple.
Whilst it may be tempting to access your entire pension fund in one go, for a good holiday for example, don’t forget only 25% is tax free, the rest is taxable at your top rate. 75% then of any funds you withdraw are added to your other income for the financial year and if your total “income” is more than around £42,385 you will pay at least 40% tax on it.
It simply does not make sense to pay 40% or potentially 45% income tax just to access your pension fund in one go, it makes that holiday very expensive indeed! The sensible thing then to consider is withdrawing the fund over a period of years to minimise the liability. This also makes sense in getting a good balance between living today and still being able to enjoy a reasonable standard of living in future.
If you do this, (partial withdrawal) where will you invest the fund you have not drawn? Is it invested in the right place bearing in mind your future needs? How “risky” are the ongoing investments? Markets rise and fall and cash rarely returns more than inflation.
If after considering all your options carefully you still wish to access your pension fund in one hit there is another problem; not all providers will allow you to do so. Many old pension scheme systems simply cannot cope with the new rules. You would have to switch your pension to an alternative provider, which would not be without charge. You are then potentially in “bandit” country, the world of pension liberation.
There are already offerings of all sorts of pension facilities, investments and advice but are the providers authorised and regulated by the Financial Conduct Authority. Is your fund protected by the Compensation Scheme? How much will it cost? Would you know who to trust?
Just because you can does not mean you should grab your pension fund as a lump sum in whole or in part. The alternative of purchasing a guaranteed income for life (an annuity) remains. Whilst annuities have had bad press, they avoid all these risks and thus may still be the best option for you. A regular risk free guaranteed income for life sounds good to me.
There are problems then leaving the funds invested, problems taking them out and Bandits lying in wait for the unwary. No matter what you plan to do you should seek fully independent advice and ensure any company you deal with is authorised and regulated by the Financial Conduct Authority. You can search for local independent advisers at www.unbiased.co.uk or feel free to contact us.
A will dispute doesn't have to mean warAll disputes take their toll emotionally and financially, but disputes over wills are often the most bitterly fought. Only recently it was revealed that the family of Peter Ustinov was still embroiled in a bitter feud over his estate, some ten years after he passed away.
Going through the courts not only costs money, but takes time. The tremors of a family feud can ripple on through generations, long after a final result has been achieved and, in some cases, after the protagonists themselves have passed away.
But there is another way! The Association of Contentious Trust and Probate Specialists (ACTAPS), of which we have member solicitors within our firm, is committed to promoting the resolution of disputes by encouraging the use of mediation at an early stage. We have successfully used mediation to resolve disputes which, at the outset, seemed impossible for our clients to retreat from.
Mediation is a confidential process. It involves an independent third party – a mediator – who is usually legally qualified in the area to which the dispute relates. They come fresh to the facts of the dispute and facilitate the parties in reaching agreement by bringing their own perspective and by narrowing the issues. Each mediation is different. The parties can meet in one room, or stay apart.
Although not all cases are suitable for mediation, those that are often end not only with a settlement of the core dispute, but also with a greater understanding from both parties as to the other’s position. This has the potential to allow the parties closure, feeling that they have fulfilled a need to air their grievances. As inheritance disputes are often deeply personal, this is of significant benefit.
Of course, not all disputes can be settled. Should litigation be necessary, it is often possible to conduct it in a less hostile and more cost effective way. Our team is committed to achieving these goals. In our view, dealing with disputes sensibly and with sympathy to the emotional issues, needn’t mean war!
For a free 15 minute telephone consultation to discuss your own situation, contact Jenny Bruce
at Birkett Long LLP on 01268 244144.