We are pleased to see the Treasury unveiling more and more freedoms to access pension pots. Chancellor George Osborne today confirmed pensioners could use their pots like a bank account. From next April all over 55's will be able to access their pot ion full and make as many withdrawals as they wish.
For each withdrawal retirees will receive 25 per cent tax-free with the rest charged at marginal rates.
Osborne has also abolished the 55 per cent charge on pension funds payable on death. We are delighted to see much greater flexibility and tax reductions in retirement saving. It is fantastic news for those pensioners looking to use more of their own money.
Grandparents can give their grandkids deposits for new homes or go on new trips.
For financial planning, it provides a wealth of opportunities for the over 55's.
Your home and your property can both be used to improve your standard of living and give greater freedoms.
Advisers can explain how you can maximize the massive relaxation of rules.
Mortgages
The interplay of your property and pension has always been crucial but the new freedoms make it even more important. Already we have seen the age limits for lending fall dramatically in recent years.
The average maximum loan stood in the mid-80s until a couple of years ago before dropping.
It now stands in the mid-70s as lenders have turned away from older borrowers.
This is mainly to avoid the so-called PR disaster of repossessing an ill or dying old widow who can’t make their payments.
It cuts against the grain of demographic changes and an ageing population.
In addition, older borrowers are facing new hurdles thrown up by tough new mortgage rules introduced in April.
The new rules make it much harder for lenders to dish out loans without property checks.
They must assess every borrower’s income and expenditure to make a solid judgement about whether they can afford repayments.
Until April the vast majority of retirees took out an annuity, which while low rates were punishing, it did provide a secure income for life.
Mortgage lenders could judge clearly against this income and assess affordability.
But the new pension freedoms open a can of worms for mortgage lenders.
What if people blow their saving pots on Lamborghinis within 12 months?
With freedom comes responsibility and there is now far greater uncertainity over retirement incomes in the UK.
This makes life difficult for those lending into retirement.
While this is a challenge it remains to be seen how lenders approach this and one would hope that pension pots may now be viewed as assets as well as income.
So, if someone has a £200,000 pension pot then some of it could be seen as an security for a mortgage loan instead of simply an annual income.
We would also be delighted to see the new freedoms park a wave of transfers from the older generation to the young.
Pensioners can now dip into their inheritance and pass it on to their next of kin.
