Page 3 - Pension Works_Autumn_2017_Newsletter

RETIRED HOUSEHOLDS HAND

OVER £7,400 TO THE TAXMAN

n further evidence that receive during their working lives than pension regulations, which allow them to
Ipensioners are seeing their today’s workers. It can also be down to access their defined contribution retirement
the financial acumen of the baby-boomer
savings from age 55. That’s why it’s
incomes rise, those in retirement generation who managed their finances important to take professional advice
have seen their annual tax bill well, saved hard and paid off their before accessing your pension pot. Please
grow by 5.7% to an average mortgages as soon as they could. get in touch. Taking too much cash out in
one go can mean that you end up paying
£7,410 (2015-16 tax year) . Although many in their 70s are reaching the high rates of tax, when with a little careful
1
end of their working lives, and have often planning you could be paying less.
Nearly 30% of pensioner household income been collecting their state pension for several
was taken up with paying the taxman, and years, more than 11% of women in this age Tax treatment depends on the
this figure includes income tax, council tax, group still have a job, as do 15.5% of men. individual circumstances of each
VAT, insurance premium tax and vehicle client and may be subject to
excise duty in the 2015-16 tax year. This AVOID THE PENSION TAX TRAP
compares with 34% of average annual Retired people can find themselves paying change in the future.
income paid by working households. more income tax because of the new 1 Prudential, Jun 2017

PENSIONER INCOMES
ON THE RISE
Pensioners’ incomes have been steadily
rising over the last few years. In a
remarkable turnaround, more people in
their 70s now earn enough to pay tax at
the higher rate of 40% than those in their
30s. This can be due in some cases to
generous final-salary pensions, as well
as the comparatively higher wages and
regular bonuses they were more likely to

WILL YOUR PENSION GO TO THE WRONG PERSON?

t can come as a surprise to also mean that children and stepchildren
Imany people to learn that may not be provided for.
their pension doesn’t form INVESTIGATIONS
part of their estate on death. If on your death the situation isn’t clear,
Unlike property, savings and then pension scheme trustees and
investments which can all be administrators can carry out their own
dealt with under the terms investigations to decide who should receive
your pension benefits. They can consult the
of your Will, who gets your Will, contact family, friends and colleagues
pension savings depends on to establish your personal circumstances.
who you nominated when you However, this can be a lengthy process.
were asked to complete an The best way to guard against your on free of tax, and if death occurs after
‘expression of wishes’ form by pension savings going to the wrong person age 75, then income tax is payable when
your pension provider. is to make sure you keep your pension your beneficiaries start to withdraw the
nomination form updated, otherwise there
money, at their marginal rate.
is no guarantee that the decision reached
As it isn’t compulsory to provide beneficiary
details and return the form, some people by your pension company will be what you MAKING LIFE EASY FOR
overlook this important step. This can mean had intended to have happen. THOSE YOU LEAVE BEHIND
a considerable delay in the payment of When completing the nomination form,
pension benefits to dependants. PENSION FREEDOMS it’s a good idea to provide the full names
Following the changes to the rules of all your intended beneficiaries, so
Other complications can arise. If you governing defined contribution pensions in rather than just nominating your children,
nominated a previous spouse to receive April 2015, your pension savings can be for example, it makes sense to name
your pension benefits but subsequently passed to anyone you choose to nominate, them individually. Make sure you have a
remarry and don’t update the form, then and that doesn’t have to be your spouse current copy of your nomination form and
this could mean that your ex-spouse or dependants. In the event of your death keep it in a safe place with your Will and
would end up benefitting instead. It could before age 75, the money will be passed other important documents.