Today we have taken a number of calls from people who are asking whether to take their tax-free cash in advance of the budget on the 16th March 2016.
Will tax-free cash still be available in a fortnight?
Millions of people are relying on their tax-free lump sums as an integral part of their financial planning with some money earmarked to pay off mortgages or other debts.
If you’ve already got a tax-free lump sum to date (lets say you’ve been a member of your employer pension scheme for 20 years) it seems highly unlikely that this will be taken away.
There should be no need to rush to grab your lump sum now – especially if you weren’t planning to take it any time soon.
What about future pension savings?
In 2015 The Treasury asked the industry for their views on changing from today’s tax relief pension system to Isa-style pensions, where you get no tax relief on money in but withdrawals are tax-free.
Naturally, the tax-free 25pc element would not exist in the new system, and so for future savings there would be no 25% tax free-element.
This will create two separate pension systems. The current system would probably be preserved, at the same time as a new one coming into play straight away.
So what should I do?
Rather than rushing to grab your tax-free cash now, if you’re going to take any action it ought to be topping up your pension under the current system which does allow you to receive valuable tax relief and “build up” tax free cash. Contributing the same money to pensions in the new system, or if they remove higher rates of tax relief, it may suddenly look much less attractive.
This blog is for information only and is not intend to replace independent financial advice from a Chartered Financial Planner.
The Information in this blog gives our thoughts on potential changes and is not legally binding.
If we can assist in anyway, please do not hesitate to contact us on 0116 254 2255