Pension Freedoms by John Copsey

The new pension freedoms implemented by Chancellor, George Osborne, have been a popular topic of conversation since the 2014 Budget when he made the big announcement. The day has arrived and the new rules are now in force, so we asked Informed Financial Planning’s Chartered Financial Planner, John Copsey, to write down his thoughts. Here they are…


Pension Freedoms

So the day has finally come when George Osborne will allow us to buy a Lamborghini with our pension funds, but is this a good idea?

Well I found a nice used Gallardo V10 with only 16,500 miles on the clock for £85,000, but maybe I should be thinking longer term.

If you’re over age 55 with a pension fund, you can now take 25%, a quarter of the fund, as tax free cash and the rest you can draw out as you wish. Remember, you will have to pay income tax on that, which could be as high as 45% if you’re not careful.

There are various ways of accessing your funds with new styles of pension contracts being launched by the various pension companies.  Probably a lot of people don’t realise that their existing pension contract isn’t suitable for these new freedoms, so will need first to move (transfer) their fund before being able to enjoy their money.

The Chancellor announced free advice to all those retiring, but this was soon clarified as guidance.  The industry press therefore was awash with “will the public understand the difference?” so let me have a go at explaining!

Guidance is sign-posting your options, what you could do.  This will be provided online by a new website called Pension Wise (https://www.pensionwise.gov.uk/), or over the phone by The Pensions Advisory Service, and face to face by Citizens Advice Bureau. These forms of guidance are pointing out options available, not what you should or shouldn’t do.

Advice in our book is exploring the options and then clearly pointing out the best one for you, even if it’s not what you want to hear! (No Lamborghini for me then?)  Advice by the way from an FCA authorised and qualified individual with pension’s experience, not a flow chart with a week’s training.

I therefore welcome the new freedoms, it’s going to help our clients achieve better outcomes where they are suited to the new options.  What does worry my colleagues and I however, is where people make uninformed decisions at the expense of their future security or worse still, fall victim to unscrupulous scammers promising the earth.

So my advice is to make no hasty decisions, remember that your pension is for your retirement and most of us will actually live a lot longer than we probably think!


This article was originally published on 08/04/2015.  Taxation reliefs, levels and bases can change in the future and the content of the article refers to our understanding of taxation legislation at the date shown.  Tax is dependent on your own personal situation and circumstances and is subject to change based on UK legislation and taxation regime.


If you feel Informed Financial Planning can help you make the right financial decisions, or would like more information regarding the new pension freedoms, please contact us to arrange a free, no obligation initial meeting with one of our advisers.

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