Tax rate charge on transfers on or after 9 March 2017
Qualifying Recognised Overseas Pension Schemes (QROPS) transferred on or after 9 March 2017 are now subject to tax charge at a rate of 25% on the transfer. The measure took effect with respect to relevant payments from QROPS from 6 April 2017.
Tax relief means some of your money that would have gone to the Government as tax goes into your pension instead. You can put as much as you want into your pension, but there are annual and lifetime limits on how much tax relief you get on your pension contributions.
With a defined contribution pension, you build up a pot of money that you can then use to provide an income in retirement. Unlike defined benefit schemes, which promise a specific income, the income you might get from a defined contribution scheme depends on factors including the amount you pay in, the fund’s investment performance and the choices you make at retirement.
A defined benefit pension scheme is one where the amount paid to you is set using a formula based on by how many years you’ve worked for your employer and the salary you’ve earned rather than the value of your investments. If you work or have worked for a large employer or in the public sector, you may have a defined benefit pension.
A personal pension is a type of defined contribution pension. You choose the provider and make arrangements for your contributions to be paid. If you haven’t got a workplace pension, getting a personal pension could be a good way of saving for retirement.
Providing greater flexibility with the investments you can choose
A self-invested personal pension (SIPP) is a pension ‘wrapper’ that holds investments until you retire and start to draw a retirement income. It is a type of personal pension and works in a similar way to a standard personal pension. The main difference is that with a SIPP, you have greater flexibility with the investments you can choose.
Under the pension freedoms rules introduced in April 2015, once you reach the age of 55, you can now take your entire pension pot as cash in one go if you wish. However, if you do this, you could end up with a large tax Income Tax bill and run out of money in retirement. It’s essential to obtain professional advice before you make any major decisions about how to access your pension pot.
Hastings O'Loughlin is a business name of Hastings O'Loughlin Financial Services Ltd. Company No. 4502991. Registered Office at Hastings House, Birds Royd Lane, Brighouse, HD6 1LQ. Authorised and Regulated by the Financial Conduct Authority.