EDITOR'S LETTERMerryn Somerset Webb
Three pension traps for the unwary
Not long now. By the middle of next week, most people hitting 55 will find themselves in a whole new world of choice. They’ll be able to pick and choose how and when to access their pensions.
They’ll be able to keep as much or as little as they like inside their pension wrappers; to invest in their own way; and, crucially, leave anything left on their death to their heirs entirely free of inheritance tax (IHT).
We look at the details of just how this all works here. But, as regular readers will know, it is mostly excellent news for the kind of people who read MoneyWeek – intelligent savers and investors.
I say mostly for the simple reason that there is no end of danger in these reforms. Why? First, because it comes at a difficult time for the markets. Anyone looking to make the most out of pensions freedom will want to use some kind of income drawdown system to maintain their lifestyle. But income isn’t easy to come by these days.
UK interest rates remain at rock-bottom lows. In several countries in Europe rates are actually negative. And the increasingly desperate search for yield means that almost any asset offering one (be it a buy-to-let property, a corporate bond, or a dividend-paying equity) is rather more expensive than it should be.
• Read the full editor’s letter here: Three pension traps for the unwary