Member Article

You can have your pension cake, but beware, the taxman might eat it!

~~From paying off a foreign mortgage to making property improvements, the use of funds ‘liberated’ in the first month of ‘pension freedom’ have been wide ranging, according to South Coast and Gatwick-based independent financial advisers, Carpenter Box Wealth Management.

While the new regulations dramatically increase the financial options of many pension-holders over the age of 55, the message from Roy Thompson, Associate at Carpenter Box Wealth Management, is ‘you can have your pension cake…but beware, the taxman might eat it!’

This is because whilst 25% of such a big lump sum may be tax-free, the rest could attract a tax charge of 45%, depending on the amounts involved, because it will be treated as income.

Says Roy: “Over the last month, a number of clients have been investigating withdrawing money from their pension, for example to pay off a mortgage on a foreign property or to carry out improvements on a property. In each case, the level of tax to be paid has come as a real shock to the individual involved so, yes, you can have your money, but it comes at a price.”

Situations have also arisen where a pension scheme will not allow withdrawals to be made and the fund has had to be transferred to another pension provider who will allow withdrawals – typically, this incurs additional costs.

Add in new pension death benefit rules and it’s clear that specialist advice is needed – so Carpenter Box Wealth Management is running further free breakfast briefings at both its Worthing office on 19 May and 18 June and two sessions at its new Gatwick offices on 9 June and 14 July. More information via http://carpenterbox.com/event-pensions/ or from Lucy Tunstall at Carpenter Box on 01903 234094.

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This was posted in Bdaily's Members' News section by Colin Bridgman .