Key Retirement Solutions is launching a tax calculator to help clients make an informed choice on retirement income following the radical changes announced in last week’s Budget.
The launch of the new tool on 27 March is set to coincide with the introduction of new rules governing the way people take an income in retirement.
Savers will be able to cash in single pension pots of up to £10,000 and take total cash of £30,000.
However, only the first 25 per cent will be tax-free, meaning people who take the whole sum to put in a savings account could be hit with a tax bill as well as put future retirement income into question.
The new tax calculator will help customers assess how much tax they will pay if they take various options with their retirement pots.
Paul Wilson, managing director at KRS, said: “Some customers may benefit now from cashing in under the new rules as rates on small pots are often poor but others will value the option of alternatives including standard and enhanced annuities, fixed-term annuities, drawdown and equity release if appropriate.
“The early evidence we are seeing is that people are delaying decisions on annuities once the options are explained. There is a temptation though that people will cash in and give the taxman a boost when they don’t need to.”
Under the new rules, someone taking a £20,000 fund in cash would pay 20 per cent tax on £15,000 and could pay more if the money tips them into the higher tax bracket.
