Page 30 - Phonebox Magazine November 2014

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Finance Matters
Latest changes in pensions undermine annuities further
The 2014 budget saw some of the most radical changes to pensions ever seen and the impact of the announcement was even greater due to the complete surprise with which it was received. Like most people I thought that the changes were probably the last big changes we would see announced for some while - well ‘some while’ turned out to be just six months.
At the recent Conservative conference George Osborne announced changes to the taxation of death benefits from pensions, in what must seem like an ongoing onslaught by the annuity providers. Indeed, the Chief Executive of one of the leading annuity specialists in the UK recently stated ‘I’m going to get a voodoo doll’ in response to Mr Osborne’s announcement!
The new rules, which come into force from April 2015, see any remaining pension fund of someone dying before age 75 being available tax free to the beneficiaries. For those dying after age 75, a rate of 45% tax will be charged, down from the existing 55%. From 2016/17 this will reduce to the marginal rate of the beneficiaries.
This clearly adds to the attraction of pensions but whether it sounds the death knell for annuities is another matter. There will always be those who wish to have a secure income in their retirement, regardless of the fact that it will probably mean that nothing will be left to the next generation. One of the reasons annuities get a bad press at present is due to their low rates but this could change in years to come and they may yet again provide an attractive return for conservative investors.
If you would like to discuss or review your own investments or pensions, or look at how we can help implement a strategy for retirement then please call us. Initial meetings are without cost and we are happy to come to see you in the comfort of your own home. See our advert below.
This article does not constitute advice and should not be taken as a recommendation to undertake any course of action mentioned without consulting a relevant professional.
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30 Phonebox Magazine
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