Pensions are for retirement, not once in a lifetime holidays

Pensions are for retirement, not 'once in a lifetime' holidays

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Julia Grimes
Published: 28 Oct 2014 Updated: 03 May 2016

There are growing concerns over the Government's radical reforms to pensions, which will allow pension investors to completely cash in their pension pots from the next tax year.

David Smith, Director, Financial Planning, Tilney Bestinvest comments:

Under the new rules that come into play next April, 25% of any previously untouched pension pots will be available tax free, with the remainder being subject to income tax. Some may see this as a windfall - not least the Chancellor.

While these pension pot owners might expect to liquidate their pensions with 25% tax-free and 75% taxed at their marginal rate, under current proposals emergency tax codes will be used to assess how much tax should be deducted from pension withdrawals. This will likely lead to many basic rate taxpayers, or even non-taxpayers, seeing deductions at 40%, or even 45%.

As many of these people will take no professional advice whatsoever, the first they will know of these tax charges is when a far lower payment than they were expecting lands in their bank account. Those planning for an around-the-world cruise next year could therefore end-up with the budget for a river cruise instead.

Whilst the implementation of Workplace Pensions will ensure that the vast majority of employees will have pensions moving forward, this will do little to plug the ‘pension’s black hole’ that exists in the United Kingdom if many waste their pension funds on exotic ‘bucket list’ purchases.

In my view there is mounting evidence that safeguards need to be put in place to ensure that, first and foremost, pensions are used to facilitate a financially secure retirement. The obvious way to do this would be to insist that all retirees must generate a minimum level of income from their private pension savings before being allowed to access any additional pension funds as lumps sums. The amount need not be huge, maybe say £7,500, so that when combined with the State Pension, which will typically amount to £7,644, a basic starting retirement income of over £15,000 will be available to many.

In our view recent reforms to workplace and private pensions have, and will further, increase the demand for pensions which is a good thing. Nevertheless, basic safeguards need to be in place to ensure pensions are used to provide a liveable income stream in retirement not just a sports car or a ‘once in a lifetime’ holiday…

David Smith is available for press comment on pensions and financial planning topics at 0191 269 9970 / 07778 066 367 and can also be contacted on


Important information:

This article is not advice to invest, or to use any of our services. The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested.

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07768 661 382

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About Tilney Bestinvest

Tilney Bestinvest is a leading investment and financial planning firm that builds on a heritage of more than 150 years. We look after more than £9 billion of assets on our clients’ behalf and pride ourselves on offering the very highest levels of professional client service with transparent, competitive pricing across our entire range of solutions.

We offer a range of services for clients whether they would like to have their investments managed by us, require the support of a highly qualified adviser, prefer to make their own investment decisions or want to take more than one approach. We also have a nationwide team of expert financial planners to help clients with all aspects of financial planning, including retirement planning.

We have won numerous awards including UK Wealth Manager of the Year, Low-cost SIPP Provider of the Year and Self-select ISA Provider of the Year 2013, as voted by readers of the Financial Times and Investors Chronicle. We are pleased that our greatest source of new business is personal referrals from existing clients.

Headquartered in Mayfair, London, Tilney Bestinvest employs almost 400 staff across our network of offices, giving us full UK coverage, and we combine our award-winning research and expertise to provide a personalised service to clients whatever their investment needs.

The Tilney Bestinvest Group of Companies comprises the firms Bestinvest (Brokers) Ltd (Reg. No. 2830297), Tilney Investment Management (Reg. No. 02010520), Bestinvest (Consultants) Ltd (Reg. No. 1550116) and HW Financial Services Ltd (Reg. No. 02030706) all of which are authorised and regulated by the Financial Conduct Authority. Registered office: 6 Chesterfield Gardens, Mayfair, W1J 5BQ.


This release was previously published on Tilney Smith & Williamson prior to the launch of Evelyn Partners.