Her Majesty’s Revenue & Customs has released guidance speculating on the number of people who may choose to take money out of their pensions under the new pension regime.
QROPSreview.com has covered the proposed pension changes extensively and we have explained that the lack of a necessity to buy an annuity has in fact been the case since 2006.
The financial advisors that we have spoken to have agreed that while it may be possible to raid one’s pension, it is often not advisable to do so.
In HMRC’s first official analysis of the the Government’s pension changes, it estimates that up to 130 000 people per year will decide to withdraw money from their pension schemes.
The point of concern is whether withdrawing cash from a pension will kick you into a higher tax bracket. While an initial lump sum may be tax free, further withdrawals will incur your marginal tax rate.
The extra tax collected is expected to rise from £320 million in 2015-16 to £1.2 billion in 2018-2019, before falling to £810 million in 2019-20 and declining steadily.
Indeed, many now believe that far from a move design to liberalise pension rules, the new regime could be a cleverly designed Government ruse to generate extra tax income.
HMRC figures suggest that an additional £4bn in tax revenue could be generated over the next 5 years due to new system.
For people living outside of the UK, transferring a UK pension into a QROPS may be a far more tax efficient strategy.
To find out not just what is possible but what is best for your unique circumstances it is vitally important to seek the advice of a specialist financial planner. QROPSreview.com can put you in touch with a suitable option if required.