Pension changes from April 6th

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t’s just over a week until the pension changes that take effect from April 6th (well, in reality it will be the 7th as the 6th is Easter Monday!). There’s been a lot written about the changes since they were announced in the Budget last year, but – understandably – many people still find them confusing. So here’s my bite-sized guide:

• You can take money out of your pension if you are aged 55 or over after April 5th.
• The people who are most likely to benefit are those who have a ‘pension pot’ type pension (ie one where you – and your employer if you have one – pay into a pension). If you have a final salary or other salary-related pension, you can only take money out of it, in most cases, if you’re in the private sector. You’ll have to take advice about this and transfer it first.

SAVVY TIP: In most cases, giving up the guaranteed income of a salary-related pension will be a bad move. But for some (such as those who are seriously ill and unlikely to live for long) it could be worth considering.

• You can take out as much or as little as you like – but check with your own pension company because some may be more flexible than others.
• Only the first 25% of anything you take out of your pension is tax free. You’ll have to pay tax on the rest. You could end up paying tax at 40% if you take out too much.
• You’ll probably be taxed using the emergency code for the first payment. Unless your pension company already has your tax details, your first payment could have emergency coded tax deducted – which will be more than you need to pay.

SAVVY TIP: You’ll get the extra tax repaid when you take more money out of your pension, but if you take it all out in one go, you’ll have to reclaim the tax.

• You can get free guidance about your pension options through the government’s Pension Wise initiative, by phone, face-to-face or online. You can make a phone appointment by ringing 0300 330 1001. If you prefer, you can get online information at Pensionwise.gov.uk

SAVVY TIP: If anyone rings you saying they’re from Pension Wise, they’re not! The way that Pension Wise will work is that you will have to ring them to make an appointment. They won’t ring you first.

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Re: Pension changes from April 6th

Tax when you get a pension

1. What’s taxed and what’s tax-free

Taxed pension income

When you get a pension you pay tax on any income above your tax-freePersonal Allowance.
How much Income Tax you pay depends on the tax rate that applies to you.
Your income includes:

• the State Pension
• private pensions (workplace, personal, stakeholder)
• earnings from employment or self employment
• any taxable benefits you might get
• any other income, money from investments, property, savings

When you start getting your regular pension payments, eg from an annuity, you’ll have to pay Income Tax on them.
Tax-free pension income

Lump sums

Most pension schemes let you take 25% of your pension pot as a lump sum. This money is tax-free.
Example:
Your pension pot is £60,000, you could take £15,000 without paying Income Tax on it. You then get regular payments from the remaining £45,000. These payments would be taxed.

Taking smaller pension funds as lump sums

You can take a smaller pension fund as lump sum. 25% of it is tax-free.
You can usually qualify to do this if you’re taking:

• a lump sum worth up to £30,000 from one or more pension pots (sometimes called a ‘trivial commutation’)
• smaller pots worth up to £10,000 each from workplace pensions
• up to 3 smaller pots worth up to £10,000 each from personal or stakeholder pensions

However, if you’ve already started drawing a pension from the fund and then decide to take a lump sum, you would be charged 20% tax on the entire amount.
At the end of the tax year you might get a refund or have to pay more tax on the lump sum. This depends on your overall income for the tax year.
Tax-free allowances if you were born before 6 April 1948

You get a higher Personal Allowance.
If you or your spouse or partner were born before 6 April 1935 you might also be able to get Married Couple’s Allowance or Maintenance payments relieffor payments to ex-spouses or partner



https://www.gov.uk/tax-on-pension

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Re: Pension changes from April 6th



FOUR WAYS TO KEEP YOUR PENSION SAFE

DO NOT GIVE IN to telesales people, spam texts or doorstep sellers promising to help you release your pension early or invest your pension in a jaw-droppingly good deal.
KNOW THE NEW PENSION RULES. Education is your best weapon – find out more about pension reforms from the Government’s official service Pension Wise, at pensionwise.gov.uk
HIRE BACK-UP. A good financial adviser catches the whiff of a scam from a country mile away and spots errors or opportunities up close in the small print. You could pay less than you think for richer rewards if you hire expert help.
BE ‘SCAMSMART’. This is the slogan for the Financial Conduct Authority’s new campaign, designed to protect consumers from fraud. Visit scamsmart.fca.org.uk.



Fraudsters are trying to stand between you and the safe, comfortable retirement you deserve. Here, Laura Shannon runs through the typical scams and problems you might encounter – and offers tips on how to protect your pension from pirates out to plunder your cash.

COLD CALLS
How to deal with the pension scammers: Just say NO and seek advice early
Any phone call out of the blue from someone offering a free pension review, an unbeatable investment opportunity or to liberate your pension, should sound an alarm bell.
The investment might ‘guarantee’ higher returns for your savings than a bank or your employer’s contributions. Scammers may follow up by sending a glossy brochure while some may copy the name of a reputable business to make it believable. But if you weren’t expecting the call, be suspicious.

WHAT TO DO:
City regulator the Financial Conduct Authority recommends simply hanging up the phone.
Ignore the sales patter and conversational wizardry – such as claims they are responding to an initial form you filled out online or that the opportunity is ‘here today and gone tomorrow’.
If you frequently receive scam calls, you can also arrange ‘anonymous call rejection’ through your home phone provider, which blocks calls from withheld numbers. This is free for customers of TalkTalk, while other providers charge between £1 and £5 a month.
To find out more about blocking nuisance calls visit consumers.ofcom.org.uk/phone or call the advice line on 0300 123 3333.

SPAM TEXTS

If you are not targeted via your landline, scams might filter through to your mobile phone instead via a text message.
Even if it’s not a text from a fraudulent firm, the message’s content could still be inappropriate. The Information Commissioner’s Office – a data protection watchdog – recently fired a warning shot to call centre Help Direct UK after it sent spam texts last year worded: ‘As you have over 10k in your pension, your pension has lost £3219.43 over the last few years, to get back & find out your payout reply REVIEW.’

WHAT TO DO:
Messages with dubious claims and offers of reviews should be ignored and are, fortunately, easy enough to delete.
But before doing so, you might like to report them to your mobile network operator and help it to block the worst offenders from contacting other people. Do this by forwarding the text, for free, to 7726 – which spells ‘SPAM’ on a traditional phone keypad.

DODGY WEBSITES
There are plenty of websites delivering the news you want to hear – such as more tax-free cash from your pension and accessing your pension early. But sadly, it’s lies and traps all the way.

WHAT TO DO:
If the website tells you something you didn’t previously believe to be possible, question it.
Never act on the information you read without checking its source or before taking good advice.
You can also research whether a dodgy-looking company features on the City regulator’s Warning List by visiting website scamsmart.fca.org.uk/warninglist.

DOORSTEP SELLING AND COURIER FRAUD
Doorstep-duping comes in different guises. For example, if you engage in conversation with a cold-caller or fill out a form online relating to early pension release or an investment deal, you may find a courier turning up at your home with paperwork to sign on the spot. People have fallen foul of this and lost their pension pot as a result.
Alternatively, a doorstep fraud might not relate directly to your pension. It could be a recommendation to use newly tapped pension cash for home energy projects or another type of home improvement.

WHAT TO DO:
Never sign any paperwork you have not had time to read through or consult on with a financial adviser. The hard sell at your front door is a more intrusive form of cold-calling, and it’s harder for polite British people to assert themselves when face to face with a slippery salesman.
Time to channel your inner warrior – it’s your life savings, your right to protect it and your doorstep someone is invading. Don’t be afraid to say no.
You can also try sticking a sign to the front door making it clear you do not accept doorstep selling. Design your own or download one from website MoneySavingExpert.
Anyone who tries to carry on selling regardless, after you have pointed to the sign, is not to be trusted. But for those too shy to say ‘thanks, but no thanks’, the doorstep version of hanging up the phone is to simply close – and lock – the door.

POOR ADVICE
It does not have to be a scam to be a really bad idea. Your pension is just as much at risk from poor advice as it is from fraud.
This month the Financial Conduct Authority fined and banned Lloyd Arnold Pope, 55, and Peter Charles Legerton, 46 – both former directors of advisory firm TailorMade Independent – from holding senior positions in financial services because of serious failings in their pension advice.
Their customers, who invested more than £112 million in unsuitable investments ranging from green oil and biofuels to farmland and overseas property, now face losing all of their pension funds.

WHAT TO DO:
Use an independent, whole of market adviser, who is regulated by the Financial Conduct Authority. You can find one via dedicated websites such as Unbiased and VouchedFor.
Karen Barrett, chief executive of Unbiased, says: ‘The earlier you seek advice, the better. Ten to 15 years before retirement is ideal – but even if it’s too late for that, you’ll need an adviser to help you use your pension freedom to good effect and avoid a costly mistake.
‘Even before the pension freedoms came along, our research found that people who took advice leading up to retirement could boost their annual income from their pension by more than £3,600 on average.
‘In most cases this is substantially more than the cost of at-retirement advice, so a majority of pensioners should find the advice pays for itself within the first year alone.’
Unbiased is currently offering a free pension review with its trusted advisers and a £50 discount if you go on to take advice.
Visit unbiased.co.uk/campaigns/free-pension-check. To find a checklist that helps you to compare advisers visit unbiased.co.uk/choose-your-adviser.


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