Jonothon McColgan, director and chartered financial planner at Somerset-based Combined Financial Strategies, argued that the increase in the maximum size and number of personal pension schemes that can be taken in one lump sum was causing small pension pot holders to shun advice.
Mr McColgan said: “Obviously, as a chartered financial planner, I would advise on all aspects of a client’s portfolio, but the new triviality rules rather suggest many people will take matters into their own hands, cashing in whatever pension they have and deciding what to do for themselves.”
Kevin Hever, owner of West Midlands-based Cornerstone Financial, said many clients had “made up their minds” to take advantage of the government’s interim measures – which remain in place until April 2015, when bigger pension changes – will take affect, and cash in whatever occupational and personal pension funds they hold.
He added, however, that advice was still useful for those avoiding tax and was not highlighted enough in the debate about at retirement options.
He said: “If clients is still being taxed on what they withdraw, timing their retirement becomes a critical issue. The advice then relates to whether clients should defer their state pension and whether to take a lump sum immediately, as all this will determine their tax liabilities.”
Background
Research by Prudential has found that pensioners are being hit with taxes worth £45.6bn, with the average retired household paying £6,400 in tax from a gross income of £21,300.
According to data from the Office for National Statistics, the average size of an undrawn defined contribution pension pot held by a UK worker is £15,000. The average for all pension types, including defined benefit, is £33,000.
