18 May 2015

Intergenerational planning – making the most of the new pension rules - Blog No.2

New rules, new opportunities – but for whom?

Last week we re-capped on the new pension rules with regards to accessing your pension funds and directing your death benefits.

This week we ask the all important question: who exactly can take advantage of these new rules?

The good news…

The good news is that anyone with a ‘defined contribution’ (‘DC’) pension arrangement can now take advantage of the new rules. ‘DC’ pensions, previously called ‘money-purchase’ pensions, include a whole range of pension structures, the most common of which are personal pensions, ‘stakeholder’ pensions and ‘SIPPs’.

Anyone with one of these pensions can now make use of the new opportunities, regardless of whether they are still saving into the pension, have money sitting waiting for when they wish to start taking an income, or whether they have moved the funds into drawdown, under which a fund remains and they now draw an income directly from the structure.

But there is a proviso, which is possibly not such good news …

“It is now critical that you carry out an audit on your pensions to determine if they offer the new options and, if they don’t, to consider transferring funds to an arrangement that does, taking account, of course, of any features of your existing plan which may be attractive to retain.”

The not so good news…

Is your pension up-to-date?

The new rules regarding flexible access to pension funds and enlarged death benefit options will not, unfortunately, be adopted by every pension company, nor for every pension arrangement a company administers. In fact, most pension plans won’t offer the new rules since their systems were not originally designed to do the things that the new rules now allow. It is therefore likely that only the most recent vintage of pension plans will offer the new options.

You might ask what’s the point of hearing about all these great planning opportunities if you have the ‘wrong’ kind of pension to take advantage of them, but let me answer that. The point is, now is the critical time to carry out an audit on your pensions to determine if they offer you the new options you want. If they don’t, consider transferring funds to an arrangement that does, taking account, of course, of any features of your existing plan which may be attractive to retain.

The bad news…

The bad news is that the new planning options discussed here do not apply to the situation where a pension fund has been used to buy an annuity (although the Government is currently considering whether or not annuities might be ‘cashed in’ or sold, so there may be a glimmer of hope). Nor do the new options apply to Defined Benefit (‘final-salary’ or ‘salary-related’) pension arrangements, unless these are first converted into DC pensions. It is possible to make this conversion from certain schemes, but this is beyond the scope of this series.

Next week, what you need to be thinking about with regards to passing on your pension funds if you are under 75. (Over 75s come after.)

Richard is a Chartered financial planner, Certified financial planner, Fellow of the Personal Finance Society, Fellow of the Institute of Financial Planning, and Affiliate of the Society of Trust and Estate Planning. He works with clients in Scotland and in London and has particular expertise in helping individuals and families pass wealth down the generations.

View Richard’s profile here. If you would like to discuss your financial planning options, please contact us with any questions you might have. You can do this by calling our head office on 0131 220 0000, or by emailing us at or you can also follow us on Facebook, Twitter or LinkedIn.

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