The March Finance column from David Butler of Clay Shaw Butler

By David Butler, director of Clay Shaw Butler chartered accountants and business consultants, Lammas Street, Carmarthen

It was Bob Dylan who sang ‘The Times They Are a Changin’, way back in the 1960s.
Well, they certainly are:
Next month sees massive changes to the way we handle our pensions
The countdown is on to a May 7 General Election.
And inflation is at a record breaking low - 0.5 percent, the joint-lowest since the Consumer Prices Index began in 1989.
This month, our focus will be on pensions – as it is pretty near the top of the agenda when it comes to the questions accountants get asked.
From April 6, you'll have more freedom over how you take money from your pension pot.
These changes affect you if:
  • you're 55 or over, and 
  • have a pension based on how much has been paid into your pot (a ‘defined contribution’ pension). 
Changes from April 6 are for new pensions drawn out. You can still draw up to 25% of the fund tax free, but then any further amounts, which can fluctuate dependent on your plans, are taxed at the individual’s marginal rate of tax. This is all based on the most recent information we have on the subject. Our best tip is not to make any decisions before April 6 and certainly speak to your financial advisor.
In working our where you stand, it pays to know your pension type.
Along with the State Pension from the Government, there are two main types of pension.
Defined contribution A personal or workplace pension based on how much money has been paid into your pot. When you take money from a defined contribution pension it comes from the money you (and sometimes your employer) saved into it over the years, plus any investment returns your money may have earned. There is no guaranteed minimum - you could get back less than the amount paid in.
Defined benefit A type of workplace pension based on your salary and length of time with your employer. A defined benefit pension gives you an income based on your salary, length of service and a calculation made under the rules of your pension scheme. With defined contribution pensions, you can decide how you take your money out - with defined benefit pensions, your employer guarantees a certain amount each year when you retire.
The State Pension:
The pension you get from the Government is called the State Pension. You get it when you reach State Pension age. The most you can currently get from the basic State Pension is £113.10 per week. You don’t normally get it automatically - you have to claim it.
If you reach State Pension age on or after 6 April 2016 you’ll get the new State Pension.
How much you get from each pension type?
For most defined contribution pensions, how much you get depends on:
  • the amount you’ve paid in 
  • the length of time the money has been invested 
  • how well the investments bought with the money have done 

For defined benefit pensions, how much you get depends on:
  • the number of years you’ve worked for the employer 
  • your salary (this could be your final salary or your average salary across your career with the employer) 
  • a calculation made under the rules of your pension scheme 
When you can take your money?
You can normally start taking money from a defined contribution pension from the age of 55. This is subject to the rules of your pension scheme.
Chartered Accountants like Clay Shaw Butler operate at the leading edge of financial thinking and are well placed to track the complex and constantly evolving subject of pensions.
Firms offering pensions advice must be regulated by the Financial Conduct Authority (FCA), meaning that they must follow certain rules and standards when dealing with you. There are several ways you can find a professional financial adviser, including searching online, checking the FCA register or talking to an ICAEW Chartered Accountant.
They can give you access to practical advice on a wide range of subjects, including:
Personal pensions – is this the right choice for you? Your personal and professional circumstances will greatly influence your options and you may need help navigating the many products on offer.
Stakeholder pensions – is this more secure, more flexible variation on the personal pension the smart option? Again, it’s a question of evaluating your circumstances and thinking ahead.
Company pensions – is yours a salary related scheme or a money purchase scheme? Do you know where you stand today, and what to do if you leave your company? And what if your employer does not offer a company pension scheme at all?
Self Invested Personal Pensions (SIPP) – a personal pension for the self employed, SIPPs offer unique benefits, but also come with their own risks and tax implications.
The State Pension – most people build up some State Pension, but the amount they will receive varies. It is worth understanding how you build up state pension and how much income it will provide in later life.
UK pension rules and tax relief – changes to the rules governing pensions allow many people to pay more into their pension schemes, and on more flexible terms than previously. Are you up to speed with contribution limits, tax relief, and annual and lifetime allowances?
Planning your pension can be a complex and daunting prospect.
If you’re seeking pensions advice, a chat with a Chartered Accountant will help put the subject in perspective.
There is a good government website giving advice on pensions.
Pension Wise provides guidance on what you can do with a defined contribution pension.
You can find out more about money matters on the new-look Clay Shaw Butler website (under or news for business section) -
We have a strong and experienced team with great local knowledge all geared-up to helping you get the very best from your finances – whether that is as an individual or as a business.
We stay ahead of the game by putting great store by continual professional development for our staff.
Our director Mark Jones is now a chartered tax advisor and team member Trina Griffiths has just successfully completed her Chartered Certified Accountancy ACCA exams.
With Investors In People status at Clay Shaw Butler, we care passionately about making sure our staff have all the tools they need to serve you, our customers.

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The team at Clay Shaw Butler can be contacted on 01267 228500.
The team at Clay Shaw Butler are on Twitter. Look for @clayshawbutler.


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