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MARCH 2014 BUDGET – Makes Annuity Advice More Relevant

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ABI introduces code of conduct changes for Annuities

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Annuity Advice updates

The repercussions from the March 2014 Budget are still being felt across the financial services industry, and opinion seems to be suggesting that taking independent advice in respect of the new annuity options available to those approaching retirement is increasingly important.

In summary the Chancellor announced that from April 2015, people with a defined contribution pension still have the option to take 25% of the lump sum tax free; BUT importantly the requirement to compulsorily purchase an annuity has been removed. There is now the option to take the whole sum as cash; BUT these funds will not be tax free and the remaining 75% will be taxed by HMRC at the individual’s marginal rate of tax.

People like to have a choice over how to manage their own hard earned pension pot, and thus some will still prefer the security and consistent monthly or quarterly income and the spouse benefits from annuities upon death; whilst others will relish the prospect of spending the pension pot as they see fit.

It is ironic that both of the above would benefit from independent annuity advice in respect of their retirement options and this is to be encouraged.

People with smaller pension pots also have new options in that those with less than £30,000 can now take the whole amount, paying the requisite level of tax on the 75%, until April 2015, after which time the limit will lapse. These rules are generically called “triviality”, and will make important changes to peoples’ investment options.

Individuals with larger pots do have more options, but in principle the decisions are the same. Independent advice enables the practitioner to search across the whole annuity market, and also walk through the anticipated cash flow and tax consequences of taking larger lump sums.

Such independent  advice  from The Annuity Advice company can flow from the completion of the simple form on the front page of the website, and we look forward to hearing from you.

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by: The Annuity Advice Company on Monday 28/04/14

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