New UK financial advice opportunities explode from pension reforms

This month, on 6th April, the pension reforms are implemented, and those offering UK financial advice are ready to help. The main change that pension holders will notice is that they’ll see greater flexibility to do what they want with their pension pots.

While this might sound like a fantastic opportunity for people to use their pensions to facilitate the lifestyles they deserve in later life, it also opens them up to an unprecedented number of options, and unprecedented levels of risk. This means that it should be a busy time for financial planners looking to help their clients make the best use of their pensions savings.

Demonstrating the value of UK financial advice

One of the main risks associated with the new pension freedoms will be that those over the age of 55 with pension savings will be able to withdraw as much or as little as they like from their fund in one go.

Some people may be tempted to cash in their entire pension, and while – in some circumstances – this could be a useful tactic, in the vast majority of cases, investors should think carefully about the income tax bill this action would incur. It’s finer points like these that make the advice of a professional financial planner invaluable.

Changes to tax upon death

In addition, the new changes bring in a more favourable tax outlook upon death in the form of two new pieces of legislation: first, the removal of the 55% tax charge on lump sums paid from crystalised funds. The second is the ability to name any beneficiary to receive income from the fund – rather than it being only a dependent of the original member.

On this second point, pension planners can offer valuable estate planning to those able to limit accessing their pensions by part-funding their retirement through a variety of tax wrappers. This is only one of a hundred techniques that a professional retirement planner could advise their client on.

Offshore bonds

ISAs are a great way to minimise taxation while saving, but offshore bonds could also provide investors with a viable alternative. A broad portfolio of investments, and a broad number of tax wrappers surrounding your pension pot is an advisable strategy.

Therefore, throwing offshore bonds into the mix adds further flexibility and options to deliver tax-efficient income in retirement. Some of the benefits include:

  • 5% tax deferred annually on withdrawals.
  • Top slicing relief.
  • Gross roll up and the ability to control the threshold at which taxation is paid.
  • No chargeable event means no policy assignment to other individuals.

As expert financial planners, we believe it’s best to speak to each of our clients face to face, to understand their individual needs more clearly, helping us to determine how we can maximize their retirement savings. When the pension freedoms kick in, investors and pension holders are advised to speak with a professional financial planner to ensure they’ve acquired all the UK financial advice they can.