We have partnered with sister company Contractor Wealth.
Contractor Wealth are specialists in their field offering tailored advice for contractors and freelancers. Their extensive knowledge around how contractors and freelancers work will ensure your financial needs and remuneration structure are understood fully.
2015 heralded the biggest shake up in pensions for generations. George Osborne’s budget announcement in 2014 introduced major improvements as to how and when pension’s benefits can be accessed.
Contractors who are over the age of 55, will now have complete freedom on how they draw their pension benefits. You can take out all of the fund, draw ad-hoc lump sums as and when you need or take a flexible income to suit your needs. With all this choice and flexibility it is vital that you seek professional advice on your retirement savings and investments.
By utilising Income Drawdown you can avoid purchasing an annuity and draw benefits in a more flexible way. However it must be noted that only about 5% of current employers are expected to offer the full suite of income withdrawal options due to the costs involved, therefore you may need to consider moving funds into an arrangement that meets all your needs if you have old employee pensions gathering dust.
Income Drawdowns, unlike annuity funds can also fluctuate with market conditions and as your income is not secure it could run out if your investments perform badly, you take too much out or live longer than expected. Therefore it is vital that these funds are checked, reviewed and adapted to suit your needs, which can be done on an annual basis.
A Legacy for Future Generations
The new rules mean contractors will now be able to benefit from upfront tax benefits, save tax efficiently and also be able to access the cash at and/or during retirement. Investing in a pension could also now become key to estate planning for future generations, with many gifting their pensions not just to their children but also their grandchildren.
Funds can be left to any beneficiary of your choosing, they do not have to be left solely to a financial dependant. Any pension funds you leave to your chosen nominee can be taken as a lump sum or be drawn as a flexible income as and when required. Nominees will also have the option to pass the funds to a successor in exactly the same way.
Pensions also have the added advantage of falling outside the inheritance tax remit, therefore they are a fantastic way of saving, not only for your retirement but also for future generations.
The New Pension Rules at a Glance
- The ability to access all of your fund as a lump sum.
- No cap on income payments.
- Members will have the option of drawing ad-hoc lump sums direct from the fund known as Uncrystallised Lump Sum payments.
- Existing members in capped drawdown will have the option to convert to the new flexi -access rules if they so wish.
- Death benefits post April 2015 will be tax free for any member that was under the age of 75, regardless of whether benefits have been crystallised.
- A nominee will be able to draw any death benefits under the new flexible rules, and so it would not have to be taken as a one-off lump sum.
- Annuities will have no cap on guaranteed periods.
- Any annuities with capital protection will pay out a tax free lump sum benefit before the age of 75.
- 25% is still available as a tax free lump sum. The remaining income will be taxed at the recipient’s marginal rate of tax
An exciting new era for pensions
The 2014 budget has opened new doors in the world of savings and pensions for contractors. There is now greater choice and flexibility, making pensions an even more attractive choice for saving for contractors. To find out morhttp://www.fca.org.uk/registere about contractor pensions contact the Contractor Wealth team today: firstname.lastname@example.org
The value of investments may fall as well as rise and past performance is not a guide to future returns.
Financial advice is given by Contractor Wealth Management Limited which is an appointed representative of Intrinsic Mortgage Planning Limited and of Intrinsic Financial Planning Limited who are authorised and regulated by the Financial Conduct Authority. Intrinsic Financial Planning Limited and Intrinsic Mortgage Planning Limited are entered on the FCA Register (http://www.fca.org.uk/register)under reference 440703 and 440718.