A provider's view: Pension freedom and choice

By Mattioli Woods

22 Jun 2015

Pension Freedom and Choice came into force on 6th April 2015. The way in which individuals could access their pension funds has been dramatically overhauled and as a SIPP & SSAS Provider, Taylor Patterson thought it would share its experience of the new regime so far.

By Taylor Patterson.

Has there been a rush to withdraw money from pension schemes?

The headlines suggested that individuals would take all of their pension fund and buy a Lamborghini, however, the reality has been very different. Taylor Patterson, like many other SIPP & SSAS Providers, have not seen a rush on clients looking to withdraw the full amount of their pension schemes. In fact, Taylor Patterson has witnessed very limited client requests to either increase their pension or to withdraw all of their fund since 6th April this year. In fact, the response and instructions that have been most frequently received from advisers or direct from clients are to either stop or reduce the pension income.

This is also combined frequently with the question as to whether these individuals can still contribute to their pension fund. This is due to the fact that the assets held in their personal estate would generally be subject to IHT, whilst those monies held in the pension fund will typically not be subject to the tax.

A New Way of Thinking

This is leading to a whole new way of thinking for many members in assessing the tax efficiency of their personal and pension money. The decision has become whether to either spend personal assets over and above the pension fund, or possibly consider a combination approach, if they want to pass monies down the generations. Obviously, much depends on the advice that they receive from their professional advisers.

On death prior to age 75 the pension fund generally passes on taxfree to whomever the member has specified under the “Expression of Wish or Death Nomination Form” and the pension fund can be taken either as a lump sum or as income by the beneficiary(ies). Whenever this fund is withdrawn it always remains tax-free since the member themselves died pre 75. Whilst these funds remain within the pension fund they also still attract generally tax free growth.

However to look at the more realistic situation for death, (average age of death c. 83 men c. 85 women according to the Office of National Statistics) of the member post 75, the pension assets again can be passed on to the named beneficiary(ies) and taken however they wish. However, this time the monies are taxed at that individual’s marginal rate of income tax, at the time they are withdrawn. It is generally possible within some families, with careful planning provided by their professional advisers, to transfer assets down to either basic rate or nil rate income taxpayers. Therefore, the income tax to be paid would be less than that due under inheritance tax (IHT) rules, which is currently 40%.There has been a large uptake in clients completing/reviewing their Expression of Wish documents and Taylor Patterson are strongly suggesting that clients look to complete these to provide guidance to the pension scheme trustees where they wish the funds to be paid. These forms can be updated at any time and can be amended as and when individual circumstances change. In view of the new rules it is not only essential that your pension provider is aware of your wishes on death but suggested that the member makes all concerned aware of their wishes, i.e. leave a copy of the Expression of Wish, with your will. This should minimise any potential disputes and administrative issues at the point at which the benefits are to be paid.

What can clients expect when they wish to access their pension funds?

The government under the new legislation has made the pension provider the second line of defence, for those members who have not sought independent advice and want to take or change their benefits above the current capped drawdown limits.

For example if a client approaches a pension provider, wanting to access their pension fund the pension provider must ask several questions. This is to establish that the member is aware of the risks of withdrawing their pension funds and are aware that they have access to free guidance via the Pension Wise website (www.pensionwise.gov.uk) as well as taking the decision to pay for financial advice.

If the member still wants to proceed without advice then the pension provider, will need to ask questions, regarding their risk, health, sustainability of income in retirement and tax implications to name a few!. Until the pension provider has issued a personalised risk warning statement to the member, then they cannot proceed with the payment. Inevitably this is likely to be very frustrating to many individuals who are looking to access their pension fund, particularly as the press have talked a lot about using your pension like a bank account. However in view of the expected increase in pension/investment scams (http://scamsmart.fca.org.uk/) as a result of the new freedoms it is a process members should embrace for their own protection.

Latest news

1

Construction begins on new Civil Service office building in Talbot Gateway Alan McBride Muse Will Town Defence Infrastructure Organisation Jennifer Chard Defence Business Services Cllr Lynn Williams Blackpool Council Garry Bowker Vinci

Construction begins on new Civil Service office building in Talbot Gateway

20 May 2025

2

Skiddle raises over £750,000 for charities Skiddle cheque presentation to Alder Hey Hospital

Skiddle raises over £750,000 for charities

20 May 2025

3

Former Victorian Hotel approved for residential conversion The site

Former Victorian Hotel approved for residential conversion

19 May 2025

4

REVOLUTION PARK: Work starts on Darwen’s new home of advanced manufacturing Oliver Webber, Tracy Clavell-Bate and Tim Webber from Barnfield Group with Cllr Phil Riley, second from right, Leader of Blackburn with Darwen Council

REVOLUTION PARK: Work starts on Darwen’s new home of advanced manufacturing

19 May 2025

5

Two Cuckoo Gins named winners in The Gin Guide Awards 2025 Mark Long

Two Cuckoo Gins named winners in The Gin Guide Awards 2025

19 May 2025

Background image for hub sign up block

LBV Hub

Leverage Lancashire Business View platforms

Post your news
Post your events
Post your offers
Build your network
Improve your SEO
Gain coverage in the magazine
Sign-up
Events
LBV122 May/June Launch Event
121 Lancashire Business View Magazine Launch
Networking
21 May 2025

LBV122 May/June Launch Event

Lancaster and Morecambe College, Lancaster, LA1 2TY

08:30 - 10:30

Sub36 Networking
Networking
11 Jun 2025

Sub36 Networking

British Jewellery School, Scorton, PR3 1BA

15:00 - 17:00

Lancashire Net Zero Carbon Conference
Net Zero Carbon Social 1200pxtrident 2
Networking
18 Jun 2025

Lancashire Net Zero Carbon Conference

Crow Wood Hotel & Spa Resort, Burnley, BB12 0RT

08:30 - 13:00

Lancashire Built Environment Conference 2025
BEC 315 X 315 Px
Networking
25 Sep 2025

Lancashire Built Environment Conference 2025

Blackpool Football Club, Blackpool, FY1 6HX

08:30 - 13:00

CMI Level 5 Management and Leadership Course
UCLanAerialCampus.jpg.jpg
LBV Hub Seminars
21 Feb 2025 - 21 Feb 2026

CMI Level 5 Management and Leadership Course

Preston Campus, Preston , PR1 2HE

09:00 - 17:00

CMI Level 5 Project Management Course
UCLanAerialCampus.jpg.jpg
LBV Hub Seminars
21 Feb 2025 - 21 Feb 2026

CMI Level 5 Project Management Course

Preston Campus, Preston, PR1 2HE

08:00 - 17:00

RISE - The Academy for Female Leaders and Managers
WENDY BOWERS RISE Illustrstion copy.jpg.jpg
LBV Hub Seminars
02 Apr 2025 - 08 Oct 2025

RISE - The Academy for Female Leaders and Managers

East Lancashire Chamber of Commerce, Clayton le Moors, BB5 5JR

09:00 - 15:30

Preston Freelancer Meet-Up: May
Freelancer Meet-Up May.png.png
LBV Hub Networking
22 May 2025 - 22 May 2025

Preston Freelancer Meet-Up: May

society1, Coworking Space, Preston, PR1 3LT

10:00 - 11:30

Amber River True Bearing quarterly investment seminar
LBV Hub Seminars
22 May 2025 - 22 May 2025

Amber River True Bearing quarterly investment seminar

Cottons Hotel & Spa , Knutsford, WA16 0SU

16:00 - 18:00

The Business Network Central & East Lancashire
LBV Hub Networking
22 May 2025 - 22 May 2025

The Business Network Central & East Lancashire

Mytton Fold, Langho, BB6 8AB

11:30 - 14:15

Liverpool Business Expo 2025
https---cdn.evbuc.com-images-881365363-4862066883-1-original.20241023-085714.jpeg.jpg
LBV Hub Awards
23 May 2025 - 23 May 2025

Liverpool Business Expo 2025

Aintree Racecourse , Liverpool , L9 5AS

09:00 - 15:00

Advantage: AI – A Workshop for Business Leaders – May 29
Artboard 15.png.png
LBV Hub Seminars
29 May 2025 - 29 May 2025

Advantage: AI – A Workshop for Business Leaders – May 29

Door4 Office, Burnley Wharf, Manchester Road, Burnley, BB11 1JG

09:00 - 11:00

Advertise with us

Reaching 50,000 members, our print, digital and event platforms offer a fantastic way to raise your business profile and help you grow.

Find out more LBV122 Online Graphic
Subscribe now

Weekly news bulletin