Small Pension Pots and Dashboards – Pension Terminology

You may be forgiven for assuming this news item is (thankfully) nothing to do with pensions.  Maybe a little light relief to celebrate the start of summer?  Unfortunately, no! You should be aware by now that the world of pensions attracts some rather strange terminology at times.  For example, buddy transfers, anti-franking (yes this is an old one), annuities, safeguarded benefits, crystallised and uncrystallised benefits to name but a few. Now we have Small Pension Pots and Dashboards!

Small Pension Pots

The powers that be are attempting to spice up the industry, it seems.  We now have legislation relating to small pension pots (actual terminology).  Basically, this is intended to wipe out legacy pension schemes, both personal pensions and money purchase, for those aged over 55 years, if they in total amount do not have more than £30,000.  That is, you can now “drawdown” a maximum of three pension pots, the maximum in each being £10,000.  25% of each will be tax free and the remainder will be taxed using the emergency tax code being 20% regardless of your actual marginal rate of tax.  A higher/additional rate tax payer will account for further tax under self-assessment.  This relieves the insurer of on-going costly administration and provides the member with instant cash without the need for trying to find a home for their small pots by way of annuity purchase.

Another way, of accessing your numerous small pension fund is, of course, to transfer them into one new style pension and consolidate.  The health warning here is that there could be penalties to do so and you need to seek financial advice with the related costs in most cases.

We at PML Financial Services Limited offer a no cost half hour consultation to ascertain what pension plans you have and your needs in retirement which leads us onto the “dashboard” concept. Contact us to book yours.

Pension Dashboards.

The government is consulting with the industry at present as to how best to make available Pension Dashboards to scheme members by 2019.  The intention is that everyone who has or has had pension savings can access details of all their benefits (including state benefits) via a pension’s dashboard. That is to pull together a picture (or dashboard) of all funds to enable the member to easily assess their pension worth.

In theory we think this is an excellent idea. This proposed dashboard will provide (amongst other data) the member with current values of their pensions and projected values at retirement age.  On numerous occasions we find small forgotten pots (a good outcome) but also an over estimation of the projected value of funds at retirement (a not so good outcome), for new clients.

Here at PML Financial Services, we believe that a more open disclosure and tracking of historic pension schemes via an easily accessible dashboard can only be a step in the right direction.  In practice we are concerned how this can be achieved and the value and accuracy of the data.

Contact us for help and advice on Small Pots, Dashboards and all things Pension

So pots and dashboards in this instance are nothing to do with gardening and summer motoring.  What next?  A pension mulch (stopping seepage from pension pots?) or a gearstick analogy from 5th to 1st to describe the gradual reduction in investment risk in progressing from accumulation to decumulation of a member’s pension planning.

One thing is for certain, pensions never stand still and it is important that you take independent financial advice to guide you through this complex minefield.  At PML Financial Services we can do just that. Contact us or call us on 0121 693 0690 for a FREE initial chat about your pension arrangements.

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