Updated 13 March 2018
Many people are unsure whether to take out their ISA or contribute more to pension, or even to take their pension benefits after Mr. Osborne’s Budget. What should you do?
In the short term there is little change and most people will want to do whatever they have done in past years. The full aspect of the new ISA (NISA) does not appear before July, but as the Budget allows transfer both to and from cash and equity NISA there is no reason to delay putting in the current maximum and adding to it and transferring if appropriate after July. However, to understand the new situation for any individual ISA the first approach should be to the individual financial adviser and/or provider so that the correct current decision can be made.
“The full aspect of the New ISA (NISA) does not appear before July, but as the Budget allows transfer both to and from cash and equity NISA there is no reason to delay putting in the current maximum and adding to it and transferring if appropriate after July”
Much the same applies to a decision with regard to contributing to or taking benefits from pensions.
If an annuity has just been taken it may be possible to reverse the decision, after discussion with the individual financial adviser. Because of the tax relief on contribution it is usually sensible to contribute to any pension arrangement but, of course, this is subject to further adviser discussion. The rules change rather more after April 2015 but that does not materially alter the basic purpose of a pension arrangement – to provide a permanent income into older age so that there is less reliance on ‘the state will provide’. There is no requirement, at the moment, to purchase a pension annuity on taking benefits but this is somewhat dependent on the size of the ‘fund’ available.
Retirement options now are not really different than before the Budget but will be next year. However, this will depend on what ‘adjustments’ may be made to the rules between now and then. Whether the new rules are or will be beneficial to any individual will be influenced by current and future personal tax situation, personal choice, life expectancy, income requirement and further detailed discussion with the individual financial adviser.
The danger is that an uninformed decision is made based on information available on-line or ‘from a friend’. This could prove costly in the long run. Initially talk is free with most financial advisers and if there is likely to be any cost it will be divulged at the outset. Mr. Osborne gave the broad outline of the changes in his Budget speech. The detail is in the issue of the HMRC and other department releases in print or online and then amendments as the possible ‘unintended consequences’ arise during the next months.
The best way to understand individual requirements and decisions is to talk to an independent financial adviser who is qualified to help with these matters.
About the author
Chris Howell bought Seaway Insurance as a very small insurance brokerage back in 1987. Prior to that he had worked within the industry for 23 years. Specialising in investment and pensions.
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