In March 2014 Chancellor of the Exchequer George Osborne announced several radical changes to the ways you can manage and access your pension. These changes were confirmed in the Taxation of Pensions Bill published on October 14, and will take effect from April 2015.
The new pension rules have been designed to give savers greater
control over their money going into retirement. The changes also abolish
pension 'death tax', cover free guidance for savers and new
restrictions on private pension contributions.
If you are nearing retirement, it is important you take these changes into account.
The biggest change was the proposal to allow individuals aged 55 or
above to take the whole of their pension pot as a cash lump sum from
April this year.
Currently, although you don’t have to buy an annuity with your
pension pot you are not allowed to withdraw it all as a lump sum unless
it falls under specific rules governing 'small pots'. There are a range
of options to choose from if your pension fund is not considered a
'small pot' – including buying an annuity.
If you take all your pension pots as cash, you lose the option of
converting them into a regular retirement income – for example, by
buying an annuity. Cashing in your pension pots can also affect how much you’ll be
entitled to receive in state benefits when retired. For example, if you
boost your savings by taking your whole pension pot as a lump sum this
may reduce your entitlement to Pension Credit.
We recommend that you take advice before deciding what to do. Also read http://bit.ly/1BVvhrq
If you do decide to take all the 'pot' then
investing in a residential property to rent out has to be an option
In Ely the average 2 bedroom house is currently achieving rents
around £700 pcm. and gives an annual income of £8,400. The purchase
price of such a house would be in the region of £180,000. This is a
gross yield of 4.67%. If you take out management charges (these are
currently allowable against income tax) for the property at 10% plus
VAT then the income falls to £7,392 and the net yield before tax becomes
4.1%. Compare that with the best performing investments at the moment!
The other area to bear in mind is the potential for capital growth in
the value of the property although, perversely, this technically reduces
Maintenance and repairs are currently allowable against tax so boiler servicing etc are tax deductible.
As stated you should take professional advice on matters relating to
your pension arrangements but if you need any advice on property matters
we are here to help! Talk to the team about house purchase on Ely
665020 or specifically to Robert Mills about lettings and property