In April the new freedom and choice in pensions rules comes into play.
The changes are designed to allow pension pot owners to take as much, or as little, as they want.
Some of this (usually 25% of the value of the pot) is tax free and the balance subject to income tax; it gets added to any other taxable income to determine the rate of tax.
But will your pension pot be available this way?
Most pension pot providers have yet to say how they are going to facilitate this accessibility. They have also not stated whether they will charge for this service.
Some may decide that you can use your existing pension arrangement to take benefits from your pot. Others may insist that you move your money to a new pension pot to do this.
Many providers may be constrained by somewhat archaic computer systems in respect of your existing pension pot.
We think that providers will ask for a fee each time that you extract money from your plan.
Early signs are that they may charge an annual fee for this facility and then a one off charge each time that you ask for some money to be paid to you.
Whilst the new accessibility rules have been described as “using your pension pot like a bank account” we don’t believe it will be as simple as this.
Our expectation is that most providers will ask for a new pension pot to be established, will charge an annual fee of circa £150 and then a facilitation fee of £100 each time you ask for money.
We shall have to wait to see the details as they are announced and it should be soon because we are only two months away from the start date.
