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Pension Freedom – 5 Things you need to consider for your clients NOW

Following the recent changes in pension legislation, effective from 6th April 2015, clients may  be able to obtain the freedom and choice with their pension plans depending on the options their provider makes available.

We look at the key issues that advisers face when speaking with their clients and the actions that you may wish to consider now.

1.  If you have clients who are aged over 55 and haven’t drawn pension benefits, we would suggest   arranging meetings with them. It may be beneficial to take a partial crystallisation from their pension plan to protect the higher annual allowance (currently £40,000) before 6th April 2015.

Remember anyone taking pension benefits for the first time post 6th April 2015 will automatically be classed to be  in Flexi Access Drawdown and limited to the £10,000 Money Purchase Annual Allowance as soon as they draw anything above their tax free cash limits.  However, if your clients access pension benefits after 6th April 2015 for the first time, but only take their tax free cash entitlement and no pension income, they will still be able to take advantage of the higher annual allowance (£40,000).

2.  Make sure you are aware of your clients who need to apply for Individual Protection before 5th April 2017. This would apply to individuals with pension funds in excess of £1.25 million as at 5th April 2014, who don’t hold primary protection, but who still wish the for the ability to accrue benefits. Individuals can secure their actual fund, equal to the value of their pension savings on 5th April 2014, against lifetime allowance charges up to a limit of £1.5 million whilst still accruing benefits.

3.  Review and if appropriate revise with all of your clients their expression of wishes, with choice we get further complications, so the clearer the intended wishes of the member the better.  We would also suggest that a copy of the expression is kept with the clients will.  This should also hopefully make the transaction of passing the pension benefits to the intended beneficiaries a quicker and smoother process.

4.  Warn your clients that if they take benefits from any pension schemes without your knowledge they could jeopardise their ability to contribute to pensions in the future.

5.  If your clients don’t hold any pension protection certificates and have funds of less than £1.25 million consider contributing to their pension even if they have already started to draw some pension benefits.  With the ability to pass on pension funds to nominated beneficiaries, we expect clients will wish to consider pension planning even more so now under the new rules.

To discuss in more detail how the changes may affect your clients please contact Kerry Houghton on 01772 550614 or email kerry.houghton@taypat.co.uk.

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