4 steps to keeping track of your pension

A recent study has revealed the worrying statistic that over a fifth of all people with multiple pensions have lost track of at...

4 steps to keeping track of your pension

A recent study has revealed the worrying statistic that over a fifth of all people with multiple pensions have lost track of at least one, with some admitting to have forgotten the details of all of them. With around two thirds of UK residents having more than one pension, this amounts to approximately 6.6 million people with no idea how much they’ve put away for their retirement. Double the amount of people admit to not knowing how much their pensions are worth.

It’s an undesirable side effect of the modern working world. Whereas in previous generations someone might stay at a single employer for their entire working life, the typical worker today will hold eleven different jobs throughout their career, which could potentially mean opting into the same number of pensions through as many different providers. The new legal requirement for all employers to offer a pension scheme through auto-enrolment is likely to add further complexities.

As a result, the Pensions Dashboard is set to launch in 2019 in the hope that it will make it easier for savers to keep track of their pensions in one place. Until then, however, there are four relatively simple steps to help you track down information on any pensions you’ve forgotten about:

  1. Find your pension using the DWP Pensions tracing service at www.gov.uk/find-pension-contact-details. Start by entering the name of your former employer to discover the current contact address for them. You’ll then need to write to them providing your name (plus any previous names), your current and previous addresses and your National Insurance number.
  2. In the case of a pension scheme which hasn’t been updated for a while, you’ll be required to fill out an online form to receive contact details. You’ll be required to give your name, email address and any relevant information to help track down your pension details. This could include your National Insurance number and the dates you worked for the company.
  3. You can also receive a forecast of your State pension either online or in paper format by going to www.gov.uk/check-state-pension. After entering a few details to confirm your identity, you’ll be told the date you can access your State pension and how much you’ll receive.
  4. Finally, and most importantly, once you’ve managed to track down all of your pension information, get some advice. Consolidating your pensions might be tempting to make managing your savings easier, but you also want to make sure you don’t lose out on any benefits by doing so. Before you make any decisions regarding your pensions, seek professional independent advice on what to do next.

Women face gender gap in pension contributions as well as pay gap

Whilst the pay gap experienced by women in comparison to men is most likely a problem you’ve heard about, another gender gap...

Women face gender gap in pension contributions as well as pay gap

Whilst the pay gap experienced by women in comparison to men is most likely a problem you’ve heard about, another gender gap has emerged which is just as concerning. Recent figures suggest that, on average, women are receiving smaller pension contributions from their employers than men. Between 2013 and 2016, women benefitted from pension contributions at a rate of 7% of their yearly salary, considerably less than the 7.8% received by men.

The gap between men’s and women’s average annual pension contributions also widens as the age bracket increases. Men under 35 received £217 more towards their pension than women of the same age, a figure that increases to £594 for those aged 35 to 44. This then increases again to £1,287 between men and women aged 45 to 54, and again to £1,680 for those between 55 and 64.

Over the four year period examined, the average woman therefore received £2,489 from their employer towards their pension, over £1,000 less than men who received an average of £3,495. Worryingly, if these figures remained constant throughout a typical woman’s working life, this could result in a shortfall of £46,689 compared to the pension typically earned by a man. This figure becomes even more worrying when factoring in the statistic that women on average are still living longer than men, meaning that most women will be faced with making a smaller pension stretch over a longer period of time than many men.

The study, one of the largest ever conducted into workplace savings and taking in over 250,000 pension plans, has revealed three key factors in the significant difference between men’s and women’s pension pots. The first is that women are still more likely than men to opt for a break in their career to raise a family. Secondly, men still typically work in sectors where pension schemes are either more generous or better established. The third is linked back to the issue of the gender pay gap: as women are still earning less than men on average, this leads to employer contributions as a percentage of salary being lower.

The fact that there were significantly more men (154,999) than women (95,262) in the UK-wide study also suggests that a larger number of men are receiving pension contributions at all than women. The Department for Work and Pensions has responded to this figure stating that auto-enrolment will help to redress the balance; but has also conceded that, in light of the study’s findings, more needs to be done to bring pension contributions for women in line with those enjoyed by men.


What does the Budget dividend cut mean for you?

One of the most significant announcements made by the Chancellor Philip Hammond in the recent Spring Budget was the change to the...

What does the Budget dividend cut mean for you?

One of the most significant announcements made by the Chancellor Philip Hammond in the recent Spring Budget was the change to the amount of tax-free dividends that can be received by both company directors and shareholders. From April next year, the current amount of £5,000 will decrease to just £2,000. Whilst this is set to raise an extra £930 million of revenue for the Treasury in 2021/22, making it the biggest tax earner announced in the Budget, it has been criticised for demotivating growth and investment for businesses.

The current rules were introduced in April 2016 and mean that an individual receives a tax break on the first £5,000 of annual income from dividends. Anything above that is taxed at 7.5% for basic-rate taxpayers, rising to 32.5% for those on the higher rate and 38.1% for those paying additional rates of tax.

The chancellor has described his changes as addressing the unfairness of the current dividend allowance put in place by his predecessor, George Osborne. However, as many small traders pay themselves through dividends, alongside taking a salary from their company, the move has been seen as punitive towards those who have decided to strike out on their own in business.

The reduced tax-free dividend rate is also set to impact those who have reasonably sized stocks and shares investments outside ISAs. The Treasury estimates this to be around 1.1 million investors, approximately half of all people affected, and that on average annually they will each lose around £320.

However, there is a positive note for investors thanks to the increase in the ISA allowance. From April this year, the amount is set to rise from £15,240 to £20,000, and all dividends generated within ISAs will still be tax-free. By making smart use of the new allowance, most investors will be able to avoid feeling the effect of the changes to dividend tax.


Budget Statement – March 2017 Overview

Introduction This time last year Philip Hammond was the Foreign Secretary: then came Brexit, Theresa May as Prime Minister,...

Budget Statement – March 2017 Overview


This time last year Philip Hammond was the Foreign Secretary: then came Brexit, Theresa May as Prime Minister, George Osborne’s opportunity to spend more time with his family – or on the after-dinner speaking circuit – and Mr Hammond’s move into 11 Downing Street.

He delivered his first Autumn Statement in November of last year – and promptly announced that it would be his last Autumn Statement. “No other major economy makes hundreds of tax changes twice a year and neither should we,” he said, declaring that in future he would deliver his main Budget in the autumn. This means that 2017 will see two Budgets before the traditional Spring Budget gives way to a Spring Statement from 2018.

So here we are at the last Spring Budget – at least until we get a new Chancellor. But with Philip Hammond looking certain to remain Chancellor at least until the next General Election in 2020 (let’s discount the rumoured possibility of a snap General Election for now) we should probably get used to the idea of the Autumn Budget.

The Economic and Political Background

Theresa May has committed herself to triggering Article 50 – and beginning the formal process of Britain’s withdrawal from the EU – by March 31st. That is 23 days from Budget day and, despite minor setbacks for the Government in the House of Lords, the Prime Minister appears to still be on course for that deadline. She certainly has enough parliamentary support, with the recent vote on Brexit in the Commons going overwhelmingly in her favour.

However, it was not just UK politics that the Chancellor would have been concerned with as he was penning his speech. There’s a new man in the White House, promising radically different economic policies, and this year will see potentially pivotal elections in Holland, France and Germany. With another Budget due later in the year, there could have been some temptation for the Chancellor to delay major decisions: by the autumn he will know the result of the European elections, he’ll know how Donald Trump’s policies have started to play out and – most importantly – he’ll know how the early Brexit negotiations have progressed.

Economically, the news for the UK economy has largely been good since the Autumn Statement, with positive growth recorded in both the manufacturing and service sectors. This was reflected in the Bank of England’s last Quarterly Bulletin, when the Bank forecast growth of 2% for this year. This was an increase on the 1.4% growth predicted in November, and just 0.8% in the immediate aftermath of Brexit. “There have been relatively few signs of the slowdown the committee expected,” the Bank admitted.


There are always plenty of predictions and rumours ahead of the Budget and this year has been no exception. Speaking on the The Andrew Marr Show, the Chancellor trailed his plans for investment in technical training – in a bid to address the UK’s productivity gap which was such a recurring theme of his predecessor’s Budgets. There will also be moves to address the social care problems in the UK, and to ease the concerns of shops, pubs and restaurants about forthcoming increases in business rates.

Sadly, tax rises were also rumoured, with many papers saying the Chancellor wanted to build a ‘Brexit War Chest.’ The Telegraph suggested that the Chancellor would reject extra borrowing in favour of tax rises, with the national insurance contributions for the self-employed and duties on alcohol apparently in his sights…

The Speech

Following the usual pleasantries of Prime Minister’s Questions, the Chancellor rose to speak at 12:37pm, armed only with his notes and a glass of water. The days of Chancellors steadily sipping brandy throughout their speeches seem long gone…

Given the Bank of England’s recent Quarterly Report, his opening remarks couldn’t be anything but positive. The UK economy was, he said, “continuing to confound the doubters, with robust growth.” The deficit was coming down and the economy “provided a strong and stable platform for [the] Brexit negotiations.” We were, he said, “building the foundations of a stronger, fairer, more global Britain.”

The Economy and the Numbers

With a nice touch of self-deprecating humour, ‘Spreadsheet Phil’ apologised to the Commons and said he needed to start “with the spreadsheet bit.”

In 2016, the UK had the 2nd fastest growing economy in the G7 (behind Germany) and – in line with the Bank of England’s forecast – the Office for Budget Responsibility had upgraded this year’s growth forecast from 1.4% to 2%. However, growth was then downgraded to 1.6%, 1.7% and 1.9% in subsequent years, before returning to 2% in the financial year 2021/22.

Inflation was forecast to be 2.4% in 2017/18, falling to 2.3% in 2018/19 and then 2% (the Bank of England’s target rate) in subsequent years.

Turning to public borrowing, he forecast that annual borrowing in 2016/17 would be £51.7bn, some £16.4bn lower than had been originally anticipated. Borrowing was then forecast to total £58.3bn in 2017/18 followed by £40.8bn the following year, then £21.4bn and £20.6bn in 2020/21. This would see public sector net borrowing fall from 3.8% of GDP in 2015/16 to 2.6% this year, then 2.9%, 1.9%, 1% and 0.9% in subsequent years, reaching 0.7% in 2021/22.

The Chancellor made the point that employment growth had been spread around the UK and that – despite the rise in inflation – “real wages continued to rise.”

Despite this good news though, the total UK debt remained at almost £1.7tn – which meant that the country was spending £50bn a year on interest: “more than we spend on defence and policing combined.” Therefore – as had been widely trailed before the Budget – he wouldn’t be borrowing for any additional spending; he would instead be relying on tax rises and tackling abuses and evasion.

Personal Taxation and Allowances

One of the key themes running through Philip Hammond’s speech was ‘fairness.’ In the Autumn Statement, he’d tackled what he dubbed ‘middle class tax perks’ and now he turned his attention to the self-employed and those trading through limited companies. It was only right, he said, that those doing the same work for the same pay, “should pay roughly the same tax. A strong society,” he added, “needs a fair tax system.” He therefore introduced two specific measures:

What A reduction in the tax-free dividend allowance for shareholders and directors of small private firms from £5,000 to £2,000
When From April 2018
Comment As above, this is a move designed to provide ‘fairness’ and reduces a tax perk that had been enjoyed by those trading through limited companies and by private investors. The Chancellor said that HMRC estimated the cost of people working through companies at £6bn a year: “It’s not fair and it’s not affordable,” said the Chancellor. The move is expected to raise £2.63bn by 2021/22.
What The main rate of Class 4 National Insurance contributions for the self-employed will increase from the current rate of 9% to 10% in April 2018 and to 11% in April 2019
When From April 2018
Comment Some experts had been forecasting that this rate could jump from 9% to 12%, so the self-employed may be feeling relatively relieved. It is another move designed to ensure fairness in the tax system: the Chancellor said that, along with the abolition of Class 2 contributions, it would raise £145m by 2021/22 at an average cost to those affected of 60p a week. The Class 4 rate is levied on profits above £8,060 per year, up to profits of £43,000. Profits over £43,000 are taxed at 2%.

Previously announced in 2016, Class 2 National Insurance, a separate, flat-rate contribution paid by self-employed workers making a profit of more than £5,965 a year, is to be scrapped from April 2018.

The Chancellor also announced – it’s almost mandatory in a Budget speech – further action on tax avoidance and evasion which would, he said, raise an additional £820m of tax receipts. This will include action to stop businesses converting capital losses into trading losses and the introduction of UK VAT on roaming telecoms services outside the EU.

Beyond those measures, the Chancellor simply confirmed plans both longstanding and previously announced.

What An increase in the tax free personal allowance to £11,500 and the higher rate threshold to £45,000
When April 2017
Comment This had previously been covered in the Autumn Statement but the Chancellor again confirmed the measure was due. He also reaffirmed the now long-standing commitment to raise the personal allowance to £12,500 by the end of the parliament in 2020 and to take the starting point for higher rate tax to £50,000 in the same period.

Pensions, Savings and Investments

What The introduction of a 25% tax charge on Qualifying Recognised Overseas Pension Schemes (QROPS)
When For transfers requested on or after March 9th 2017
Comment Transferring a UK pension to a QROPS (done by someone retiring abroad) means that the person retiring can transfer their pension to the relevant country’s tax regime and – in many cases – then benefit from more favourable tax treatment on their tax free cash and/or income. The Government will now introduce a 25% charge on transfers to these arrangements, although there will be ‘exceptions where people have a genuine need to transfer their pension.’ The ‘genuine need’ will need further clarification and examination. Explaining to HMRC why you have a ‘genuine need’ to live in the Seychelles could be a tough one…
What New NS&I savings bond
When April 2017
Comment In the Autumn Statement, the Chancellor announced the introduction of a new, “market leading” savings bond, to be sold through NS&I. He confirmed that this bond will be introduced in April 2017 and will pay a rate of 2.2% over a term of 3 years with a maximum investment limit of £3,000.
What Increase in the ISA limit
When April 2017
Comment As already announced, the ISA limit will again increase, this time to £20,000 from April 2017.

Business and Business Taxation

The Chancellor stressed that he wanted the UK to “be the best place in the world to start and to build a business.” As expected, there were two specific areas that he identified as needing help, starting with a formal discussion paper on the future of the North Sea oil and gas industry.

There would also be consultations on how best to tackle the digital part of the economy – something felt very keenly by high street retailers who now find themselves competing with online retailers working from out-of-town warehouses. These premises have a fraction of the overheads of the high street, especially with regard to business rates. However, the Chancellor said that business rates raise £25bn a year and simply could not be abolished. Instead, he announced measures for making the impact of previously announced changes to business rates less painful for some.

What Mitigating the impact of business rates changes for some businesses
When April 2017
Comment The business rates changes are here to stay but the Chancellor announced three measures in an attempt to help businesses to cope with any increases:

  • A cap for companies coming out of business rate relief
  • A £1,000 discount for pubs up to a rateable value of £100,000 – which would apply to 90% of the pubs in the country
  • A £300m discretionary fund will be made available to local authorities, enabling them to help businesses impacted by the changes

The cap means that business rate costs cannot rise by more than £50 a month when a business comes out of rate relief. Taken together, the announcements amounted to a total of £435m in rate relief, said the Chancellor, and – having protected the nation’s pubs – he paused and took a sip of his water.

What The cap means that business rate costs cannot rise by more than £50 a month when a business comes out of rate relief. Taken together, the announcements amounted to a total of £435m in rate relief, said the Chancellor, and – having protected the nation’s pubs – he paused and took a sip of his water.
When Delayed until April 2019
Comment The Chancellor recognised the burden that the move to new digital, quarterly tax reports may put on small firms and thus delayed the introduction for some firms. The move, the Chancellor said, would cost the Revenue £280m in the relevant year.

Other Measures

On International Women’s Day, the Chancellor announced three specific measures he introduced as targeted at women (although one equally applies to both women and men and technically the Prime Minister had stolen his thunder earlier in the day…).

What £20m for victims of domestic abuse and violence
When Over the current Parliament
Comment The Prime Minister revealed this move on Mumsnet, saying, “Tackling domestic violence and abuse is a key priority for this Government.” It is a measure that it’s impossible to disagree with and the Chancellor said that this took spending on domestic abuse and violence to over £100m over the Parliament.
What £5m for the return to work scheme
When TBC
Comment This money is intended to help women – and men – return to work after lengthy career breaks. It’s a move that is intended to address the so called ‘motherhood penalty’.

Finally, the Chancellor recognised that next year would be the 100th anniversary of the 1918 Representation of the People Act, which gave the vote to about 8.4m women. He promised a further £5m to mark the occasion.

Alcohol, Tobacco, Gambling and Fuel

Again, there were very few changes from the Chancellor: with the rumours of tax rises, many people must have been worrying about the cost of their Friday night pint or bottle of wine…

There will be a new minimum excise duty on cigarettes, based on a packet price of £7.35 – this will mean a packet of cigarettes costing 35p more. Other than that, there were no further increases in duty on alcohol or tobacco other than those already announced, meaning that duty on beer, wine, cider and spirits will increase in line with inflation.

Vehicle excise duty rates for hauliers and the HGV Road User Levy remain frozen for another year.

The Country’s Infratructure

The Autumn Statement had been heavy on infrastructure projects – and in its Quarterly Report, the Bank of England praised the impact of that investment – but in this Budget much less stress was placed on infrastructure. The Chancellor did allocate £90m to alleviate “transport pinch points” in the North of England and £23m to the Midlands for the same purpose. He also announced a £690m competition fund for English councils to tackle urban congestion and £270m for new technologies such as robots and driverless vehicles.

There was also £350m to the Scottish government, £200m for the Welsh Assembly and £120m for the new Northern Ireland executive – and, of course, the obligatory rallying cry of “stronger together.”


Finally – and again as had been anticipated – the Chancellor acknowledged the problems of the NHS and the looming crisis in social care, caused by the constantly increasing number of people over the age of 75. He committed £1bn in 2017/18 to social care and a total of £2bn over the next three years: many had hoped and expected that the figure would be higher.

He promised a green paper on the problems of funding social care – although he indicated that it would not include a ‘death tax’ – and pledged £100m to GP triage services within A&E departments in time for next winter.

Education and Training

In many ways, the meat of the Chancellor’s speech came with his plans to reform education and training, specifically with a view to overcoming the productivity gap, as he conceded that the UK was 35% less productive than Germany and 18% behind the productivity of the average of the G7 countries.

There would be an extra £300m for PhD students, specifically in STEM (Science, Technology, Engineering and Maths) subjects.

As had been widely trailed, the Chancellor then turned his attention to technical skills, where he announced several specific measures:

  • An investment of £500m in technical education for 16-19 year olds, and the introduction of ‘T-levels,’ the technical equivalent of A-levels.
  • Free transport (based on the free school meals qualification) as many pupils will travel much longer distances than average to attend specialist schools and colleges.
  • With universities and private schools being encouraged to sponsor free schools, the Chancellor said that these moves would lead to the creation of 110 new free schools, on top of the 500 already pledged by 2020.
  • To slightly ironic cheers from the Opposition, given the recent review of education funding, the Chancellor announced a further £216m investment in school estates over the next three years.
  • Finally, he also announced the extension of maintenance loans to all students studying to doctoral levels and pilot schemes to test approaches to lifelong learning, recognising that many of today’s students will change career paths many times in their life.


Listening to a Budget speech from beginning to end is never easy going, but Philip Hammond was in a buoyant mood – and his jokes are certainly better than his predecessor’s. Hopefully, his speechwriter is paid a bonus for the ‘driverless vehicle’ reference to the Opposition which drew the loudest laughs from the Conservative benches.

The speech itself – as many suspected – was about a plan for the future as much as it was about specific measures. We can expect a lot more heavy detail when he delivers his second Budget of the year in the autumn. For now, the Chancellor declared that the Government would, “continue with its plan to make Britain the best place in the world to do business.” He was determined to, “look forwards not backwards and invest in the UK’s future.” With that, he commended his Budget to the House and to the nation, “confident in our strength and clear in our determination.”


What is the ‘real rate of inflation’?

The current projected figures for 2017 see inflation set to grow by between 2.5% and 3%, but there are already reports surfacing...

What is the ‘real rate of inflation’?

The current projected figures for 2017 see inflation set to grow by between 2.5% and 3%, but there are already reports surfacing that this figure is misleading, with most families set to experience much higher increases than this, thanks to the ‘real rate of inflation’. But what does that actually mean and why is the real rate so different to the projected figure?

The official rate of inflation has been calculated by the government using the consumer price index (CPI) since 2003. The CPI is worked out by looking at the prices of set goods and services considered by the Office of National Statistics to be representative of how an average person in the UK spends their money. However, as with any average measure, some people will inevitably experience their own rate of inflation above or below the CPI.

Whilst the CPI was adopted due to its similarity to how other countries work out their rates of inflation, thereby making it easier to compare UK inflation to that of other nations in a meaningful way, it doesn’t include a number of key figures in its calculation. For example, CPI doesn’t include housing costs or council tax increases, both of which have seen faster increases than inflation for a number of years. The previous official measure of inflation, the retail price index (RPI), did include these and has generally been around 1% higher than CPI over the last couple of years. RPI is also important as, whilst no longer classified as a national statistic, it is still regularly used by employers and trade unions when negotiating wages.

There’s also the variation in what different social groups will spend their money on. Food, energy and petrol prices have individually seen much sharper rises than the CPI, which means that people who spend more of their money on these goods and services will experience a considerably higher individual rate of inflation than the national average.

So whilst the official rate of inflation is forecast to be around 3% this year, the real rate of inflation is set to rise by a greater amount than that – which unfortunately means that many families will find their income squeezed a little more for the foreseeable future.


What does the future hold for the triple lock?

The ‘triple lock’ on state pensions has protected the older generation’s income since 2010, guaranteeing that pensions will...

What does the future hold for the triple lock?

The ‘triple lock’ on state pensions has protected the older generation’s income since 2010, guaranteeing that pensions will rise each year in line with the highest of either the average earnings, the consumer price index, or 2.5%. But the triple lock’s days look increasingly numbered, with an increasing number of financial and political figures calling for it to be scrapped.

Back in November 2016, the Work and Pensions Committee criticised the triple lock, describing it as both “unfair” on the younger generation and “unsustainable” in the long term and calling for the new state pension and basic state pension to be linked to average earnings alone. They also proposed the development of a formula to protect pensioners during periods where earnings are lower than price inflation.

More recently, former pensions minister Ros Altmann has denounced the triple lock on her blog as “a lazy way of claiming to offer pensioners brilliant protection” which is “increasingly unfair”. She goes on to explain: “If the new state pension (designed to always be above pension credit level) remains triple locked, while pension credit only increases with earnings, then the poorest and oldest pensioners will become relatively poorer”.

Responses to the review of the state pension by former chief of the Confederation of British Industry John Cridland have also seen calls for the triple lock to be dropped. A number of respondents called for the Cridland Review to make major changes to the state pension system, including a move away from the triple lock and towards indexation in line with earnings.

In his Autumn Statement last year, the chancellor Philip Hammond indicated that the triple lock would remain in place until at least 2020, when the next general election is expected to take place. If the pressure continues to mount against it, many feel the government may be forced to remove the triple lock much earlier, with some predicting its demise before the end of 2017. Labour have recently come out in support of the triple lock, however, pledging to keep it in place until at least 2025, making the future of the mechanism even more difficult to predict.


4 saving habits of millionaires

There are no shortcuts or guarantees when it comes to achieving self-made millionaire status. That said, it can’t hurt to look...

4 saving habits of millionaires

There are no shortcuts or guarantees when it comes to achieving self-made millionaire status. That said, it can’t hurt to look at the financial habits of those who have managed to do just that to try and boost your own coffers. Here are our top tips from looking at those who’ve become millionaires by age 30. Who knows, they might just lead to you being worth seven figures in the future.

  1. Don’t rely on your savings – The current economic environment makes it very difficult to become wealthy through saving, so increasing your income is an obvious but good way to boost your bank balance. Whilst increasing your main salary can also be a challenge, you might think about other ways to achieve this such as earning passive income through property rental, or taking on freelance or consultancy work on the side (just keep an eye on any tax repercussions).
  2. Invest, invest, invest – Instead of saving for a rainy day, put your savings into investments. If you choose investments and accounts with restricted access to your funds, not only will this ensure your investments pay off, but it will also help you to focus on increasing your income rather than relying on money you’ve put away.
  3. Change your mindset – Nobody has ever become a millionaire without believing that it’s something they themselves can both achieve and control. The best way to do this is to invest in yourself. Spending time educating yourself about both your business area and the financial world in general will help you to understand how to capitalise on opportunities and genuinely believe you can increase your net worth.
  4. Make plans and set goals – You’ll only boost your wealth if you actually plan out how you’re going to do it. Before you can make a plan, however, you need to decide what you’re aiming for. If you really do want to become a millionaire, then think big: if you have a certain figure you want to achieve, aiming higher will help ensure you reach it or even surpass it.

The impact of the pension changes

Introduction The changes made in 2015 to pensions, known as the Pensions Freedoms were the most significant and far reaching in...

The impact of the pension changes


The changes made in 2015 to pensions, known as the Pensions Freedoms were the most significant and far reaching in generations. As well as freedom, they introduced flexibility and choice, giving people the option to buy a Lamborghini as Sir Steven Webb, the former Pensions Minister, once famously said!

The new rules apply to anyone approaching retirement, at the point of retirement or already in retirement.

The changes were mainly aimed at Defined Contribution pension schemes, such as Self Invested Personal Pensions (SIPPs), Personal Pensions and Stakeholder Pensions – pensions which are often referred to as ‘private pensions’. However, some of the changes also had an impact on Defined Benefit schemes (for example, occupational final salary schemes). The wider implications of the changes have in fact touched just about anyone with a pension.

They have also thrown up interesting questions about wider financial planning decisions; for example, how does a saver decide whether an ISA or a pension is a better proposition for them? Should more money be put towards ISAs or towards a pension (if this is a relevant consideration)? Or now that pension funds can be drawn down in full (subject to tax deductions) under the new rules, should they be used to clear an outstanding mortgage, or buy a Lada or Lamborghini?

It’s no exaggeration to say that the new rules have had a revolutionary effect on the approach to pension planning for millions of people. We take a look here at how the changes are working in practice.  

What the change was:

Total freedom over how to draw on a pension

What has happened:

The change in the rules has meant that anyone with a private pension can take their fund from age 55 – how and when they like.

Essentially, there are three ways individuals can withdraw their money:

  1. Take the whole fund as cash in one go – 25% tax free and the rest taxed as income;
  2. Take smaller sums from time to time with 25% of each withdrawal tax free and the rest taxed as income;
  3. Take up to 25% tax free and a regular taxable income from the balance of the fund (from income drawdown or from an annuity. Income Drawdown keeps the money invested, an annuity turns the fund into a lifetime income).

Who this affects:

  1. Anyone with a private pension heading towards retirement;
  2. Anyone with a pension of any type who is at the point of retirement, including people in Defined Benefit schemes who may wish to consider whether a transfer to a private, Defined Contribution pension is now valid and desirable.


The change bringing freedom to draw a pension “as and when” to suit the pension investor has been dramatic in its implications. Whereas historically (pre April 2015) most people bought annuities with their pension fund, drawdown or phased retirement options now look far more attractive and the annuity option will, in all likelihood, become somewhat side-lined. The changes, however, do come with some potential downsides. Money drawn out of a pension too quickly may mean the pension fund runs down to zero within an individual’s lifetime i.e. they run out of money. Monies drawn are taxable beyond the tax free amount (normally 25% of the fund); heavy withdrawals, timed wrong, could mean an individual tripping into a higher tax band and paying unnecessary taxes. Careful planning and professional advice is essential.

What the change was:

Major Changes to Pension Death Taxes

What has happened:

  1. The government scrapped the 55% tax charge that historically applied to drawdown funds at any age and to uncrystallised funds on death after age 75. The charge didn’t apply to lump sums from uncrystallised funds on death before 75.
  2. The rules become more complicated when a pension investor dies, depending on what has happened with the pension up to that point.

If death occurs before age 75

  1. The beneficiaries of the pension fund can receive the whole pension fund as a tax free lump sum or draw an income from it, which will also be tax free. They can take the income either via an annuity or via income drawdown.

If death occurs after age 75

The beneficiaries will have three options:

  1. They can take the whole fund as a lump sum in one go but this will be subject to their personal income tax rate.
  2. They can take a regular income via an annuity or via income drawdown: any income taken will be taxed at their personal rate.
  3. They can take lump sums, from time to time, via income drawdown: these lump sum payments will be taxed as income at the personal rate of the beneficiary.

If death occurs and an annuity is in payment

When an individual buys an annuity, they can choose to have a joint life annuity or they could have a guaranteed period or value protection. Under the old rules, the spouse, partner or beneficiaries paid income tax at their marginal rate on any annuity they ‘inherited or 55% on lump sums. However, this changed to be tax free if death occurs before age 75.

A joint life or dependant’s annuity can be paid after death to a spouse, partner, dependant or friend of the member – it can in theory be anyone. This amount is reducing to £4,000 in April 2017. On their subsequent death any value protection or remaining guarantee period can also be paid to anyone.

A beneficiary might pay extra tax if the amount taken from your pot before you die plus the amount you leave behind is more than £1 million.

Who this affects:

Anybody with a Defined Contribution (DC) pension, or occupational DC pension or potentially a Defined Benefit pension if it was transferred to a DC first. It also applies to a private style plan such as a personal or stakeholder pension, SIPP or Additional Voluntary Scheme. Also the beneficiaries of anyone with an annuity in payment, as described above, who died on or after 3rd December 2014, prior to age 75.


Combining these new death tax rules with the new freedom rules has involved looking at pensions in a completely new light; the possibility now exists to manage a pension in such a way that it can be passed down through the generations tax efficiently. There is a clear balance between the pension supporting an income in someone’s lifetime and acting as a fund (or income) for beneficiaries. This requires careful analysis and financial planning review. It is vital that your pension provider has the ability to pay income to your beneficiaries under the new rules.

What was the change:

New Restrictions on Contributions

What has happened:

Pension contributions are now subject to a £40,000 annual allowance for most people (higher earners have a reduced figure from 6th April 2016).

The new restriction affects anyone who makes ‘flexible’ withdrawals from a Defined Contribution pension. In these cases, the annual allowance is restricted to £10,000 for money purchase contributions (called the money purchase annual allowance). The £10k allowance is reducing to £4k from April 2017.    

There are some withdrawals that can be made that won’t cause the money purchase annual allowance to apply:

  1. If the pension is worth £10,000 or less and is taken as a ‘small pot’. This can be done up to three times from a personal pension and unlimited times from an occupational pension;
  2. If an individual went into capped drawdown before April 2015 and their withdrawals after that remain within the current capped drawdown limit;
  3. If the pension is taken as a lifetime annuity (other than a flexible annuity).
  4. If only tax free cash is taken from a flexi-access drawdown plan.

This £10,000 limit does not apply to any benefits building up in a final salary pension. Investors who were already in flexible drawdown before April 2015 are able to make contributions of up to £10,000 a year.

The purpose of the new restriction was to stop the recycling of pension benefits that had already benefitted from tax relief back into the same or another pension and gaining further tax relief, which would clearly be a significant benefit at the expense of the tax system.

Who this affects:

Anybody with a Defined Contribution pension taking ‘flexible’ income from it after April 2015


Individuals seeking to withdraw monies from their pension after the age of 55 will need to be wary. Anyone who still wants to make contributions or finds their circumstances change and wants to make contributions later, after they have made previous withdrawals, could be caught by this restriction.

There are many circumstances where it is feasible to do both (make withdrawals and contributions) which are case specific, especially where so many people are likely to move jobs, continue working after retirement on a part time or temporary basis, or move employment status (for example, to a self-employed basis). It is important to consider the restrictions but also the opportunity to continue making contributions well into retirement and to get advice and help in these cases.


Other changes as from April 2015

What has happened:

One change which attracted much comment and press coverage was the emphasis on access to impartial guidance. The government wanted to ensure that anyone retiring after April 2015 would be provided with   guidance on all their options before they had to make any decisions. This measure extends to pension providers who now have to inform the individual where they can get this guidance from.

Defined Contributions/Defined Benefits – has the number of pension transfers increased?

Essentially these changes are about Defined Contribution pensions such as SIPPs, personal pensions and stakeholder schemes. They are not targeted at Defined Benefit (DB) schemes (final salary, occupational schemes). The historical ‘norm’ has been that DB occupational schemes are nearly always favourable, with better terms all round. The new rules and various changes have swayed the position considerably.

Some of the changes cover both types of schemes but the greater freedoms generally do not extend across. This means anyone with a Defined Benefit/Occupational/Final Salary type scheme may well want to investigate a transfer at or close to retirement to a Defined Contribution scheme (e.g. a SIPP). It should be noted that this option will not be available for most Public Service schemes.

The transfer option is one where advice from a qualified adviser is crucial.

Retirement age changes

The current age at which the new freedoms become available is age 55; this minimum age is expected to rise to 57 in 2028 and then rise further from there in line with State Pension Age rises.

Who this affects:

Anyone with a pension coming up to retirement. Each of these changes in their different ways has the possibility to impact on anyone at retirement, even if they have an occupational scheme.


As stated in the introduction, the main target for the various changes was people with private pensions as the changes  have most relevance for those at, or close to, their retirement point. However, there is a clear knock-on impact for all those with pensions. For example, anyone with a Final Salary scheme (Defined Benefit scheme) will now have to weigh up carefully whether they will benefit from transferring to a Defined Contribution scheme.

For many people, the new “guidance for all” initiative will help – at least to stop or lessen the prospect of an individual unwittingly diving into the wrong option; but for many, full blown and appropriate advice will remain the most important factor.

Contact us

If you would like to discuss any of the topics in this guide in more detail, please call Andy or Nick on 01663 747000 (Option 1).

See the government website with impartial pension options advice at www.pensionwise.gov.uk


Brexit and Trump: the last gasp of the old guard?

Many people who voted Brexit are quick to point out that the motivation that drove them to vote Leave was quite different from...

Brexit and Trump: the last gasp of the old guard?

Many people who voted Brexit are quick to point out that the motivation that drove them to vote Leave was quite different from the motivation behind many voters of Donald Trump in the US election.But when we drill down and look at demographics and income levels, we find a myth and a clear truth.

Click on the image below or here to read our full article.



1 in 10 people not saving anywhere near enough for retirement

Figures released in November 2016 have revealed that over one in ten (11%) of working people have yet to begin paying into a...

1 in 10 people not saving anywhere near enough for retirement

Figures released in November 2016 have revealed that over one in ten (11%) of working people have yet to begin paying into a pension pot. Worryingly, this includes nearly one in ten people in the 51-65 age bracket. The average age at which most people expect to begin saving towards their pension is 46, and almost 40% of people under 50 are worried that what they have saved will only just be sufficient to support them during their retirement.

One in five people in the same age group admitted that they will need to continue working beyond the age they planned to retire as they know they won’t have enough saved. The study also revealed that most people hoped to retire at 62, an age which many in the pensions industry see as being unrealistic due to increased life expectancy and retirement on average now lasting more than twenty years.

The study also shows that planned retirement age shifts later in life as people get older. Those aged between 21 and 30, for example, on average plan to retire at the age of 60 years and six months. In contrast, those in the 51-65 age bracket expect to retire at 62 years and ten months. Both of these fall considerably short of the current State Pension ages for both age brackets. However, almost 90% of over 50s are on track to being able to retire when they reach State Pension age, and most say they believe they will be able to live comfortably once they retire.

The average age at which people currently start putting money away for their pension is 27, and over 50% of people under 40 expect their retirement income to be either equal to or less than the average income of this year’s retirees. This equates to an annual pension of no more than £17,700 for those up to 45 years away from ending work.