Pensions just got more flexible

Pensions just got more flexible

Spring has sprung and this April has brought us not only sunshine, but something even brighter - big changes in pensions!

Fundamental reforms, introduced in the 2014 Budget, come into effect this month. But if you don't have a clue what these changes are, you're not alone. To understand the implications, we need to take a step back and clarify some pension jargon. There are two main structures of pension provision....

The first is known as ‘defined contribution’, or ‘money purchase’ where you, the employer, or both, pay in a set amount each month. The fund grows and you end up with a pot of money at retirement. But the size of this pot isn’t fixed - it depends on how much is put in when, investment returns, charges etc. And the pension income you end up receiving is unknown until you start drawing from this pension pot.

The second structure is a ‘defined benefit scheme’, known as a ‘final salary pension’, which pays out a guaranteed level of pension income based on your income when you retire and the number of years you’ve been working.

Most people today are in a ‘defined contribution’ scheme, and the current reforms are mostly in relation to this. So what’s changed?...

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Pay more into your pension to save your child benefit

Pay more into your pension to save your child benefit

The government’s just announced that parents who are higher rate tax payers (currently those earning more than £43,875 a year) will have their child benefit axed from 2013. The benefit will be stopped even if only one parent falls into that tax bracket. This will affect families with only one parent working the most. Hmm… I can see this affecting lots of women.

But… wait for it, there’s some good news.

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