The real cost of not taking advice
In January the FCA produced some market data in an attempt to understand the impact of the new pension freedoms (introduced from April 2015). The figures show that one in five people who encashed a pension pot of £250,000 or more took no advice.
This is alarming because they would have automatically paid tax of 45% on the pension (as income above £150,000 is taxed at 45%). Huge sums of tax have been needlessly paid, reducing the value of a pension fund far more than the credit crunch – which at least has recovered somewhat.
Some speculate that this was and is the only real reason for allowing pension freedoms – to collect far more tax. Perhaps the Budget on 16th March will provide further insight into this position.
Similarly, only yesterday I met with someone who had not protected his Lifetime Allowance, which will result in a large tax liability.
Taking advice does have a cost, but so does not taking advice, however taking advice also has a value, not doing so does not.
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