Article by Mhairi
HMRC has announced that from April its tax rules will changes relieving the need for pension advice for many.
Since the pension rules were changed back in 2015, HMRC has applied emergency tax codes where people have taken a lump sum from their pension. This has led to millions being overpaid in tax. In the last three months of 2024 alone, almost £50 million was repaid by HMRC. Experts estimate that over £1 billion has been overpaid in tax over the last 10 years. These overpayments have caused serious financial harms to nearly half a million pensioners, who have then had to endure a long and difficult process to reclaim their overpayments. Even those taking professional pension advice have been unable to avoid the emergency tax codes on their lump sums.
But finally, HMRC has seen the light. From April they will no longer apply emergency codes and will instead use regular tax codes to ensure that the correct tax is paid at source. They say that an electronic system will be put in place to automatically apply the correct codes, so people will not need to seek pension advice on their tax payments.
Let’s hope this goes smoothly. It will make a big difference to hundreds of our clients who have fallen foul of the old rules.
Pension wealth growing
Pension wealth has become an increasingly important element of household wealth over the last 20-30 years. According to the Office of National Statistics (ONS), pension wealth now accounts for 35% of total household wealth, almost as much as property value which accounts for 40%. The survey also found that:
- The average household wealth in the UK is now just under £300,000
- But the average for the top 10% of households is £1.2m of which £625,000 on average is in pensions.
- There are huge regional variations as you’d expect. In the North East the average value is £180,000 but in the South East it’s a massive £490,000.
- These figures are up to 2022, so probably even higher now.
Women less involved with pension advice than they should be
Despite the increase in household wealth, women are still not as involved as they should be when it comes to financial decision making. According to the latest survey of High-Net-Worth clients by Charles Stanley, they found that:
- Only 67% of women were “involved” in decisions with their financial advisor, as opposed to 80% of men.
- 20% didn’t have an adviser at all.
- Only 30% of women actively made decisions with their adviser about their finances.
- But most wished they had been more involved once they were divorced.
But why?
According to the survey women often felt overwhelmed by information about their finances. There’s no need for them to be. As female financial advisers we are able to help with any pension advice or any other issues related to finances.
High costs of childcare
Of course, way before you can even think about taking pension advice on drawdown and the possible tax implications you have to make sure you save enough into your pension in the first place. Having children for example, can hamper your ability to save, especially for women of course.
A recent survey by Charles Stanley found that 75% of parents had not realised how expensive parenting would be.
- 51% had nor considered the costs of conceiving in the first place.
- 25% hadn’t considered savings for their child
- 27% hadn’t realised the costs of education
- 11% said they would limit the number of other children because of the costs.
10% of parents said that they had to ask to receive inheritance money early to cover the costs and 20% said that they had to find a better paid job to maintain their standards of living.
