I have been inundated with pension questions since the new rules came in a couple of months ago. And please keep them coming. If you have any pension-related question that you want to ask then please drop me a line at firstname.lastname@example.org. The changes are complicated and are not quite as clear as was initially suggested so no question is too straightforward or simplistic to answer. It’s become clear, for example, that many people may have a bigger tax liability than they initially thought so it’s wise to check out exactly what tax you will have to pay before you take money out of your fund, since once it’s out it can’t go back in.
People have been asking about the ‘free’ information the Government is offering. I would suggest that you go to the Pension Wise site at www.pensionwise.gov.uk. There are full details on that site of the options available and how the recently introduced changes impact what you can now do with your pension pot. You can also call Pension Wise if you are looking for more information. You do have to be aware, however, that while they can give you general guidance and information on the new rules, they are not qualified to give you specific advice relating to your situation. They can’t, for example, tell you which option is best for you or advice you which products you should buy. For that you will need to talk to an Independent Financial Adviser, and you can find one who is suitably qualified and in your area at www.unbiased.co.uk .
The rules that came into force this month are in relation to the choices you have available with the money you have in a personal pension. These rules allow you to take the money in your pension fund whenever you like, without having to buy an annuity, or income, with your pension fund. If you have already ‘sold’ your pension funds in exchange for an income you are not likely to be impacted by these rules. You will, instead, be hoping that the Government delivers on its promise of extending the pension changes to people like you who are already in receipt of an income.
They have said that they will, although the details of how this will work are not clear yet. The thinking is that you will be able to carry out some sort of ‘reverse purchase’ where you sell your income back to someone in exchange for a lump sum. At this point it’s not clear who you will sell it to, whether it will be the company that you bought the annuity from or from one of a number of third parties that decide to become involved in this new market. It’s also not clear at this stage what value there will be for you in taking this course of action. It will require careful consideration that what you are doing is actually good value for money. There are likely to be lots of charges to the various parties involved so you will need to make sure that buying back your lump sum does make sense for you, and is more attractive than continuing to take a regular income.