Andy James, head of retirement planning, Towry comments on the need for there to be no further pension changes in this year’s Autumn Statement:
“Following historic changes over the past 18 months to the way in which pensions will work – including the simplification of the state pension, the abolition of the pension ‘death tax’ and the flexibility afforded to over-55s as to how they withdraw their pension – the industry, and consumers, are now desperate for a period of calm.
“It is not yet clear exactly what the final legislation over these forthcoming changes will look like, and we expect the Chancellor to confirm the details. Even then, pension providers will have just four months to produce new products that will work best for consumers. This is an incredibly tight deadline, and some providers will not meet it. We are unlikely to see much in the way of new products until summer 2015 at the earliest.
“Consumers meanwhile have been left utterly confused as to how they can make their retirement fund work best for them, as a direct result of the continually changing pensions landscape. In order for individuals to make the best choices, and in order for financial advisers to offer them the best possible advice before they make their decisions, we urge the Government to make no further changes to pensions – not at this Autumn Statement, nor next year’s Budget, nor indeed any Emergency Budget that may result from the General Election.”
Ian Dyall, head of estate planning, Towry calls on the Chancellor to consider a moderate rise in the inheritance tax threshold:
“Any tax break is always going to be welcomed by many people, and the suggestion of a rise in the inheritance tax nil rate band from its current £325k rate is no exception. While the Government has hinted about a possible rise to £1m, they have not been clear on whether this will be for the individual or for a couple – and therefore perhaps a more moderate increase to £500k per individual, which would mean a £1m rate for married couples, would more accurately offset recent inflationary pressures on property prices.
“According to research by the IFS, the number of estates which will be liable to the current £325k band will quadruple from 2.6% in 2009/10 to 9.9% in 2018/19 – and so the current freeze in the nil-rate band will result in more money finding its way to the taxman, if people do not take the right action to mitigate their potential IHT liability.
“A rise to £1m on the individual nil rate band will reduce inheritance tax to zero for many, and significantly reduce the tax for others, but from a political perspective, the Conservatives could again be accused of looking after those who are better off.
“Whatever the nil rate band is following the Autumn Statement, it is important to remember there are a number of ways you can mitigate your inheritance tax liability, including: • a whole of life insurance policy in trust - which generates a payment on death to cover any tax that may be due. Remember a life policy is only enacted upon your death, so there is no point in it being susceptible to inheritance tax!
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