Despite receiving bonus payments of more than £1m, many City professionals will be taking advantage of the A-Day changes instead of buying fast cars and big yachts, claims Route Wealth Management.
It suggests although a typical City employee will earn more in 10 years than most people over 40, they realise their City careers may be relatively short, with more and more people planning to be free of the City and retire within the next five to 10 years, which means a much greater focus on pensions and investment earlier in their careers.
Route Wealth Management points out, looking after the financial needs of this type of client means more creative advice around tax minimisation, sheltering income and input on a range of investments either directly or collectively.
It says while the expectation is many will splurge their bonuses on cars, yachts, houses or horses, the vast majority do not want to do anything out of the ordinary, and are investing it wisely.
Simon Pimblett, head of research and development at Route Wealth Management, says many are taking advantage of the A-Day changes to accelerate their pension funding and move closer, much more quickly to using their lifetime investment limits.
He adds: “Our clients want to know the money they earn today is being invested to provide the yield and growth they need to achieve their lifestyle goals, whether it is to pay off the mortgage, pay for children’s school fees or to retire early. They’ve worked hard to get where they are, and they don’t want to blow it.”
Standard Life have also expressed their concern for people with pension funds over the lifetime allowance limit of £1.5m.
After A-Day people with pension funds larger than the limit, which will increase each year up to £1.8m by 2010/11, could be subject to up to a 55% tax charge, if they don’t apply for protection, which Standard Life says could cost members tens if not hundreds of thousands of pounds.
As a result Standard Life have contacted around 250 clients known to have funds of more than £1m, to highlight the importance of seeking financial advice about protecting their fund, if they haven’t done so already.
Margaret Craig, customer communications manager at Standard Life, says: “We would hope anyone with a large pension fund has already sought advice on protecting themselves against the Lifetime Allowance charge. As a precaution we have written to customers with funds known to be in excess of £1m. Protection of pension assets after A-Day is an extremely complex matter and missing out or getting it wrong could be a very expensive mistake.”
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From 1 April 2019
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