Contractors urged to take advantage of pensions makeover
For many people who work for themselves, the idea of retirement is one which seems daunting due to the uncertainty surrounding pension arrangements and the fact that many people who work for themselves find it hard to make arrangements that they feel confident about. 2015 saw one of the most comprehensive overhauls that the pensions system has ever seen, loosening some of the restrictions that previously applied to the way pensions are accessed and introducing unprecedented levels of flexibility.
The Chancellor, George Osborne, announced the changes in his 2014 Budget, promising that contractors and others would be able to have more control over how and when they access their pension income. As such, the ways in which pension drawdowns can be made are a lot broader than they were previously, when only 25 per cent of an individual’s pension could be drawn from their pensions pots once they had had their 55th birthday. Usually, the balance would then be used to purchase an annuity to offer them a lifetime income, which would mean that contractors who chose this option would be at the mercy of the markets as to the value of their annuity and effectively limited their options significantly.
The new rules still allow those approaching pensionable age to withdraw 25 per cent of their pension tax free, but now they can enjoy the freedom to choose what they do with the remaining 75 per cent. This means that contractors could liquidate their entire pension pot should they wish to, and allows them to take more control over their finances when it comes to making the best choices to ensure they can afford to retire when they want to with an income that they are able to predict and control.
Contractors who are keen to ensure that they are managing their money as efficiently as possible will benefit from the advice in our guides to contractor tax, and we also have plenty of useful information about the advantages and disadvantages of a limited company which can include pension planning. Our Free 60 page comprehensive guide to contracting also contains a variety of useful information about a number of aspects of financial management.
For specialist advice on the most cost-efficient way to plan for your future, including managing your pension, call one of our friendly team today on 01442 275789 or email firstname.lastname@example.org.