Families look set to benefit from the new pension freedoms, according to research from Prudential, as couples plan to take advantage of the new rules to pass on their wealth.
Families to cash in from pension freedoms
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Families look set to benefit from the new pension freedoms, according to research from Prudential, as couples plan to take advantage of the new rules to pass on their wealth. According to Prudential, one in four couples will use the rules to safeguard an inheritance for their children, while one in six would like to take advantage of the flexibility to make gifts to their loved-ones during their lifetime and help their family buy a home, pay for education, or simply fund a luxury that otherwise they might not be able to afford. Under the new rules – which came into effect in April – money held in defined contribution pensions can now be passed onto beneficiaries free of inheritance tax. However, as savers can now also spend their pension as they wish, they no longer have to wait until they die to pass their money on. All savers over the age of 55 can cash in all, or some, of their pension, the first 25% is paid tax free with the remainder taxed at your highest rate. But although many savers interviewed in the research were keen to help their families out financially, there were also high levels of concern around their retirement planning. A third were worried about running out of money, 15% about making financial mistakes and 13% feared paying more tax than necessary. Just under one in ten (9%) felt they had too many income choices while 7% were concerned about fraud. Vince Smith-Hughes, retirement income expert at Prudential said: “It’s good to see that six months in, the pension freedoms are encouraging people to stop and think about their financial problems later in life. These figures show that for many people there is a balance to be struck between passing money onto their family and funding their own retirement.” He added: “For most people, a consultation with a professional financial adviser will help them make the most of these choices and for those with defined contribution pension savings aged 50 or over the government’s free and impartial Pension Wise service offers valuable guidance.”
Source Moneywise http://ift.tt/1OpAcqB
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