Nearly nine in 10 of over 55’s are unaware they will face an income tax bill when taking out a cash lump sum under the new pension freedom rules being introduced by the Government, according to new research from Sanlam Wealth Planning..

The new study, which questioned 2,000 people over the age of 55 across the UK, found that 85% thought the Government had failed to communicate sufficiently that they will incur income tax on 75% of their pension by withdrawing their pot for cash from 6th April, just as they will do if purchasing an annuity or by using a flexible drawdown scheme.

Despite much confusion, appetite to take out a lump sum is high. One in three people said they planned to take advantage of the new rules and take out considerable sums, not knowing about the tax they will pay. The figures suggest that millions of people across the UK are opting to exercise the new rules, unaware that the pension funds they have built up over many years of hard work will be subject to tax charges.

Alex Morley, CEO, Sanlam Wealth Planning: “The majority of consumers feel annoyed of having paid high tax bills throughout their working lives and appear to be unaware that taking out a cash lump sum from their pension pot could leave them with less than expected in their pocket.

“This lack of awareness underlines the need for consumers to seek professional advice of financial planners who can support people in setting their objectives for retirement and planning on how they can get there.”

When made aware of the new rules and implications of high tax bills, retirees were asked what actions they would take in regards to their pension. One in three  said they did not know what they will do when new freedoms come into force, highlighting the importance of guidance services and advice in helping people understand their choices.





An offset mortgage is a smart and tax efficient way to cut your mortgage costs, yet surprisingly only around ten per cent of borrowers are currently taking advantage of this type of home loan.

It can be a big money saver for mortgage borrowers and makes even more sense in times like these when interest rates on savings accounts are at rock bottom. By simply combining your savings and mortgage balances it’s possible to save thousands of pounds in mortgage interest costs and at the same time reduce the term of your home loan.

Another key benefit, even more so for higher rate tax payers, is that there’s no tax to pay on your savings interest and the equivalent return is the same as your mortgage rate.

With interest rates on even the very best instant access and 1 year savings accounts struggling to hit 1.5 per cent, for many people there’s far more to be gained by offsetting your nest egg against your mortgage balance which in many cases is being charged at upwards of 3 per cent.

A further plus point is that offsetting gives you flexibility, in that you always retain access to your entire savings balance in case you need to dip into it at a later date.

Although many standard mortgages will allow you to make limited over payments, unlike an offset mortgage, once you’ve committed to the overpayment you can’t get that money back at a later date.

A major reason for the poor take up is that consumers assume it’s a complex product and only suitable for those with large savings balances, but both of these assumptions are wide of the mark.

A further issue is that not all lenders offer the offset facility, and therefore some customers are missing out because they aren’t even given the option to take advantage of this breed of mortgage.

Along with Barclays and First Direct, Yorkshire Building Society is one of the main players in the offset market and unlike some rivals it allows offset to be used on its entire range of standard mortgage products with just a 0.2% loading on the rate.

Offset is available across a wide range of loan to values (LTV) with some of the top deals as follows – First Direct 3 year fixed at 2.79% and £950 fee to 65% LTV, Yorkshire Building Society 5 year fixed at 2.89% and £845 fee to 75% LTV and Barclays Lifetime Offset Tracker at 2.29% and £999 fee up to 75% LTV.

To give you a taste of the savings you can achieve with an offset and to prove that it is a viable option for those with fairly modest savings or those who intend to save on a regular basis, the following numbers highlight the positive impact this strategy can have on your finances.

For someone with savings of £7,500, offsetting this balance against a £100,000 mortgage at 3.00% would save interest charges of £7,753 and takes 1 year and 4 months off the term of a 25 year mortgage.

You don’t have to have a huge lump sum to benefit from offsetting, regular savings will work too.

For example, if you are able to put aside £200 per month into your savings account each month, then you’ll save £17,159 in mortgage interest charges, cut 3 years off the length of your 25 year mortgage plus you’ll end up with a savings balance of £52,800 when the mortgage is repaid.

In the past, people have chosen a standard mortgage without really giving it a second thought, but with a wider choice of competitive offset options and savings accounts paying next to nothing it’s time that more borrowers took advantage of the financial benefits that offset can deliver.

Pensions have repeatedly hit the headlines over the last year with radical reforms announced in both the 2014 and 2015 Budgets. Despite the improved awareness of pensions that has undoubtedly resulted from changes to the retirement market, many savers find pensions a confusing and complicated subject.

David Smith, Financial Planning Director at Tilney Bestinvest dispels ten of these most common ‘myths’ and reveals the reality.

Myth 1: You have to stop work and retire to draw on your pension

“No. As long as you are 55 or over, you may access your pension regardless of whether you decide to stop work. And with people enjoying improved health and longer lifestyles, continuing to perform some form of work, including part-time employment, can be a positive lifestyle choice as well a financial necessity alongside drawing pension benefits.”

Myth 2: Your Will controls who will benefit from your pension on your death

“This is a very common misconception; it’s actually a beneficiary nomination form that dictates who will benefit from your pension in the event of your death, although pension scheme trustees will often revert to the Will for guidance if no nomination has been made.”

Myth 3: All of my pension fund is available as a tax-free cash lump sum

“With the news that from the new tax year people will be free to entirely cash in their pension if they choose to, there is a serious concern that some may not understand the tax implications of making pension withdrawals.

“This is a very complex area, so professional advice should be sought, but as a rule of thumb; 25% of any withdrawal taken will typically be payable tax free with the other 75% being subject to income tax at your highest marginal rate. Even relatively small pension pots could therefore be, at least in part, subject to income tax rates of 40% or more and even a basic rate taxpayer cashing in the entirety of their pension pots could face the nasty surprise of an emergency tax rate.”

Myth 4: My existing pension plan is ‘Pension Reform Ready’

“This is not necessarily the case. In fact it’s unlikely to be the case!

“Although the legislation is changing, insurance companies are not being forced to apply the new rules across their pension contracts. This means that everyone facing retirement in the near future should be reviewing their pension now, as there is a high likelihood that existing pension contracts will not be adopting all, or possibly any, of the new Pensions rules.”

Myth 5: I’ll be able to access my pension like a bank account through a ‘hole in the wall’ machine

“This is highly unlikely as you will need a very clever cashpoint machine! The taxation of pension withdrawals (let alone the investment structure of the underlying plan) is complex to say the least, so it is very hard to envisage how withdrawals via cashpoints could ever become commonplace.”

Myth 6: Annuities no longer exist

“Oh yes they do. In fact, despite much comment to the contrary, annuities will remain a mainstay of the retirement income market as for many people the certainty of a guaranteed income for life will continue to be appropriate.

“Indeed, if at some point in the future we see long-term interest rates rise and therefore annuity rates rise, it’s not inconceivable that annuities could return to their former glory days. Also, watch out in the new tax year for some new innovative annuity plans that will take full advantage of the new Pensions Legislation.”

Myth 7: Any liability to 55% tax for being in excess of the lifetime allowance is only assessed once (at the point pension benefits are first taken)

“Not true. A potential charge for being in excess of the lifetime allowance can take place any time a “benefit crystallisation event” occurs. Further “benefit crystallisation” events at which a lifetime allowance charge could impact include death, remaining in drawdown at age 75 or purchasing an annuity.”

Myth 8: Retirement is all about having a well-funded pension

“Pensions without doubt are a key aspect, indeed the centre-piece, of a retirement plan but they may not be the complete solution. The amount of investments you might need to provide a sufficient income to maintain a comfortable lifestyle in retirement could be a lot more than you realise, particularly if you are used to maintaining a large home and enjoy regular holidays. For anyone aspiring to earn more than the UK average earnings (currently: £26,500) even a sizeable pension of £1 million will not be sufficient and therefore a comprehensive retirement plan should consider a much wider range of options than pensions alone.”

Myth 9: Pension funds have opaque charges and high fees

“While old-style pensions had confusing fund series with complicated commission structures built in, these days the fund choices available in pensions are as varied as you can find in Individual Savings Accounts, especially within Self-Invested Personal Pensions. These choices range from very low cost index-tracker funds through to higher fee active funds. The funds you would invest in today within a pension will no longer include the costs of commission.”

Myth 10: SIPPs are for confident people who want to manage their own investments

“No. A SIPP is simply a pension account that provides access to a wide range of investments from different fund managers. These will appeal to those who like to choose their own investments and ‘self-invest’, but for those who either don’t have the time or inclination to do this, there are plenty of options available including having a portfolio managed for them by a discretionary manager, receiving professional advice or investing in multi-asset funds.

The forthcoming pension ‘freedoms’ have been dominating the personal finance news over the last few months and as we approach 6th April it is important that customers understand their choices and what it will mean for them in retirement.

The most important thing to stress is that just because these sweeping pension reforms start next month there’s no need to rush in and make a decision that you may live to regret in later life.

Under the new rules, from age 55 you will be able to access all the money you have saved into your pension pot, and not have to buy an annuity. Options include: taking the whole or part of your pension pot as cash; keeping the money invested and draw a regular income from it, buying an annuity, or a combination of these.

Richard Jones, retirement director at Scottish Widows agrees and said: “Consumers aren’t being forced to make a decision on the 6th April.”

“For many, the appropriate thing to do will be to keep money invested in their pension pot while they think about the best choice and plan how to provide for the future they want.  For many people there is still a lack of understanding and certainty about what the changes actually mean and how they may affect their individual circumstances. We must collectively try to avoid the risk of people sacrificing long-term and hard earned savings for a short term need.”

I think although April 6 is seen as the start of a pension revolution, it shouldn’t be viewed as a deadline by which you must make a decision.

It’s important to check the details of your own pension plan(s) and get your head around your financial options in retirement.

To help you understand your options, and make the right retirement income decision I’d suggest a couple of websites which will help answer many of your questions and give you some useful pointers in this area.

The Government’s Pension Wise service  offers comprehensive guides and explains the various options as well as showing you how to avoid pension scams. It also offers you the choice to register your interest for telephone and face to face guidance.

Another useful resource is a refreshingly non-sales provider website that answers questions on the state pension, looks at how you’re taxed in retirement as well as some useful retirement calculators which may help you come to a decision that works for you.

It’s important to take time to consider carefully your options, particularly as rising life expectancy means we can expect a longer retirement.

George Osborne unveiled details of a new help-to buy ISA in today’s budget in a bid to help first time buyers.

Under the terms of the scheme first-time-buyers can receive a financial bonus of up to £3,000 each to put towards the deposit for their first home.

Savers taking part in this initiative will have their savings boosted with a payment from the government, paid to them at the time they purchase their first home.. The bonus on offer equates to 25% of funds saved, for example if £2000 is paid into the account, the government will top it up by £500.

The maximum amount that can be put into the Isa and is £12,000 – and the government’s maximum contribution of £3,000 will boost the deposit to £15,000 – but crucially this allowance is per person, so couples have the option to double up on these figures with a combined bonus of up to £6,000 on offer.

The payment will be made towards a first home but the government will not permit the scheme to be used for the purchase of a buy-to-let property, as the aim is to help first time buyers rather than existing landlords..

Stephen Noakes, from Lloyds Banking Group said: “We welcome the support the Help to Buy ISA will offer first time buyers and believe it provides a genuine solution to the challenge of raising a deposit. We know that this is the key barrier when trying to buy a first home and the Help to Buy ISA will reward positive savings behaviour and make a real difference in helping young people get onto the property ladder faster.

“The fresh support announced today combined with other Government schemes, such as Help to Buy, gives a much needed boost to first time buyers. We expect it could reduce the amount of time you have to save by just under a year.”

In his budget today Chancellor George Osborne announced that the first £1,000 of interest earned on savings will be completely tax-free for lower earners from next year,

This move will bring a smile to the faces of savers who have suffered from rock bottom interest rates in recent years, the new allowance, which will come into force from April 2016, is expected to see more than 9 out of 10 taxpayers no longer paying tax on their savings interest.

Basic-rate taxpayers will be eligible for the full £1,000, while higher-rate taxpayers – those who earn more than £42,701 and less than £150,000 – will qualify for a reduced £500 interest cushion.

The Chancellor told the House of Commons: “People have already paid tax once on their money when they earn it. They shouldn’t have to pay tax a second time when they save it.”

Andrew Hagger personal finance expert from MoneyComms, said: “It’s a breath of fresh air for hear savers – they will welcome the news that tax has been slashed from savings in today’s Budget.

“The long overdue move will help the less well off, and pensioners, and hopefully today’s announcement will kick start the savings habit in the UK.”

However, Hagger pointed out that historically low interest rates continue to have a major impact on some people’s incomes and the new savings personal allowance whilst welcome isn’t going to replace the lost income savers have suffered during the last six years.

“Only long term higher savings returns will revive the savings culture in this country,” he added.

With the average easy access savings account paying a paltry 0.6% Hagger said “This is a small step in the right direction but substantial rate rises are needed if consumers are to notice a meaningful difference in their savings income”.

Research from comparison site shows that broadband speeds across the UK are at their fastest at 5am, but slow by more than a fifth by the time the majority of people are using their PC, laptop or tablet at 9pm.

The range between best and worst speed varies in different parts of the UK with Exeter, Chester and Bath amongst those that saw the biggest difference in speeds, with all three seeing a slow down by more than 50% from peak to trough.

London and Cardiff fare slightly better but still see their broadband speeds drop by around a third.

A spokesman from, said: “It won’t come as a surprise that your internet is bright eyed and bushy tailed in the early hours when it’s not groaning under the weight of evening demand. What will surprise many people is by how much speeds drop.

“Given that most of us want to use our home broadband in the evening, it may be concerning to find out that the speed advertised when we sign up won’t necessarily be the speed we get at peak hours.”

Most customers are aware of a degradation in service standards with seven out of ten users saying they notice their broadband is sluggish at certain times of the day, with more than half pinpointing the window from 8pm and 10pm as the worst.

Many respondents say the slow speeds have seen them giving up trying to watch films or catch up TV online, while more than a third were frustrated that it had stopped them from working.

The USwitch spokesman suggests “If you think you could do better, consider shopping around for a new deal. People may also find that speedier fibre broadband is worth investing in – particularly for households with multiple connected devices.”

According to recent research from Key Retirement Solutions, over a quarter of UK workers aged 55 or over feel they will never be in a position to give up working completely for fear of not having sufficient money to live on.

In a survey of more than 3,000 UK adults, one in four of those currently working and over the age of 55 said they will never be able to afford to fully retire , whilst 10 per cent admitted that they will carry on with full-time work for as long as they can.

Of the 55-plus year olds who are still in work, about three quarters said they are still working because of financial reasons.

Dean Mirfin, spokesman for Key Retirement, says: “It is striking to find so many over-55s do not believe they will ever be able to afford to retire and paints a worrying picture of the current state of retirement.

“Of course, many of those planning to work until they drop may be entirely happy about it. But the other side of the coin is that millions are worried about having enough money to survive in retirement and that is a major factor in staying in work. Even those who plan to retire are not entirely certain when they can afford to.”

Scottish Friendly has called for the issue of formal ‘think again’ warnings to be issued to customers wishing to cash in all or part of their pension when the new pension freedoms take effect next month.

The savings and ISA provider says that guidance alone from bodies such as Pension Wise and Citizens Advice is not enough to prevent people putting their hard-earned pension savings at risk.

A spokesman for Scottish Friendly, said: “Like many in the industry, we have concerns that people will make investment decisions that could fall flat and ultimately leave pensioners without any source of income. Those retirees planning to invest into property are of particular concern as the volatile nature of the market could leave thousands of people penniless if the housing bubble was to burst.

“The prospect of considerable numbers of people using their pension to buy property for buy-to-let purposes is a very real and present danger to them and the wider long term economy. The industry needs to be doing a lot more to alert people to the risks they could be taking before they take the decision to withdraw all their money to fund this type of investment.”

It added “For those with modest pensions, putting all their money into property represents a real risk compared to those with larger pots who could use property as part of a diversified portfolio. Putting all their money into property means they would in effect be running a business, they’d have no access to their capital and there is no certainty that their property will generate the income they originally envisaged. Unlike regulated investments where customers are protected by Treating Customers Fairly rules, investing in buy-to-let property moves outside this protection.

“It is good that pensioners have access to guidance from such bodies as Citizens Advice and Pension Wise, but this relies on the individual reaching out to examine their options. A more formalised approach also needs to be adopted that ensures that all retirees are alert to the potential downside of drawing down all or part of their pension savings and in particular the risks of using buy-to-let for retirement income.”

Up to one million people nearing retirement age still owe money on their mortgage, according to a new report.

The latest research from LV= looking at the finances of retirees reveals that less than one in four over-50s were planning to seek professional financial advice before they retire.

These numbers are worrying ahead of the government’s pension changes next month which will give people the chance to use their retirement savings as they wish.

LV= said that a third of people do not understand the new rules or how the changes will affect them.

Some may simply not be able to invest another property as a way of providing a monthly income with a million mortgages yet to be fully repaid by retirees.

It is estimated that more than four million current retirees have outstanding debts, with more than half of these owing money on credit cards.

A spokesman for LV= Retirement Solutions, said: “In just a few weeks those approaching retirement will have even more choice as to how they take their pension income. This is a great opportunity for pension savers and the men and women who take advantage of these new rules could significantly boost their income.

“We would always encourage people to seek financial advice to ensure they make the most of the savings they have spent a lifetime building. We believe that it is crucial that the industry works together to demonstrate the value of guidance and advice to savers.”