There’s just one month to go until the end of the tax year end. This is often a frantic time of year for advisers as their clients seek to top up pensions, ISAs and sacrifice end of year bonuses before the deadline. However, this tax year end has even greater significance attached to it as the new pension freedoms will also kick in from 6 April. So what additional messages should we as advisers be delivering to our clients as the tax year draws to a close?
Here is a list of 5 key actions which may need to be covered before 6 April 2015.
1.Where should you now save?
With the new pension rules taking access out of the equation for the over 55s should pensions or ISAs be the first choice for savings?
The majority will get a better return on a like for basis by saving in pensions ahead of ISAs, and anyone who gets a higher rate relief on their contributions will always see their pension outperform the ISA regardless of how much tax they pay on their pension income; so in the run up to retirement it could pay to move existing ISA savings into a pension.
2.Getting in shape for 2015
The future of retirement income is almost upon on us; are your pensions stuck in the past?
Anyone wanting the new freedoms will need to make sure their savings are in a modern, flexible DC (defined contribution) pension that allows this. Theres no obligation for every DC pension scheme or provider to offer it. Many pensions will have been around for years designed with a very different retirement journey in mind. For many it will be necessary to transfer benefits to a more modern pension which is fully flexible and can meet retirement needs.
Its easy to think that time is on your side. After all, you may not need to access the new income flexibility for several years. But theres a real risk in leaving it too long you simply dont know whats round the corner.
The new death benefit options may not be available if you die while in an existing scheme. The result could be missing out the option to have an inherited drawdown pot from which your family can continue to access at any time, leaving just the option of lump a sum or annuity. Transferring a pension when in ill-health can bring it into the IHT net and outweigh the benefits of a move to a flexible plan.
3.Keeping funding options open
If you are considering accessing the new flexibility you may want give one last thought about maximising your funding before doing so; the price for accessing the new flexibility is a 10,000 reduced annual allowance.
Anyone who wants to access their pension income but keep their funding options open may want to think about designating some funds for capped drawdown, under a single arrangement plan, before 6 April 2015 while the option is still open.
4.DB DC: Last chance for public sector transfers
Those that are in a public sector DB (defined benefit) scheme may have been seduced by the income flexibility and death benefit options that a DC pension will be able to provide. Those who wish to take the plunge and transfer from DB to DC have a month to get their transfer application to the DB scheme.
The last date for unfunded public sector transfer applications to be received by the transferring scheme before the opportunity closes for good is the 5 April 2015. After then, only public servants in the (funded) University or Local Government schemes will have the same freedom as those in the private sector DB to transfer into the new world of freedom and choice.
5.Review death benefit nominations
The new death benefit rules have changed the dynamics for those looking to pass on any remaining pension fund on death. This means revisiting existing death benefit nominations to ensure they continue to meet an individuals needs and objectives and also taking into account if an existing scheme will even allow a preferred solution.
And under the new rules, the scheme administrator cannot nominate someone for nominees drawdown if theres an existing dependant or an existing nomination in place. So it is important that nominations include any non-dependant they want to have this option. It is worth remembering that a nomination doesnt have to be all or nothing as it is possible to nominate a number of different beneficiaries and to perhaps skip a generation with some of the fund.
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