Now that is what I call a plan… read more on the changes to pensions and NISAs

At first glance of the headlines from the Budget 2014, it appears that we are in for a windfall.  In addition to the tax changes, including the personal allowances etc, there are changes to both pensions and ISAs.   Indeed, the changes to pensions and ISAs are very significant and in both cases will improve the flexibility of these plans and make both more useful financial planning tools for people living in the UK.  Those of us living in Spain also need to be aware of the changes as they can improve the choices available to us too.

Many years of experience (28!!) have taught me that the headlines in the papers after a budget are often followed by many “ah, but” moments when the full details and all the caveats etc are revealed. “Winners and Losers in the Budget Lists” are also very suspect until all the details are known.  Already with the changes to pensions and the opportunity to withdraw pension funds we can see these things happenings.  We have therefore put together a list of documents direct from the HMRC and HM Treasury on the Budget 2014  and comments on what to watch out for.

Pension Changes in the Budget 2014

“Ah, but” point number one.  Despite the headlines these proposed changes are subject to a consultation and are NOT yet the final rules. Do NOT spend the money that you think you will be able to get from your pension until the law is changed. The consultation document can be found at Budget 2014 Pension Freedom Consultation

Some changes in what you can take from your pension will take place from 27th March.  They are relatively minor although all are welcome including the rules on “Trivial Pensions”.  Also the amount that can be taken from a pension has been increased from 120% to 150% of the Goverment Actuary Department rates (similar to the rate for calculating an annuity).  This means you are able to take a higher pension for any given pension pot size.

“Ah but” point number  two.   These changes only apply to defined contribution pension schemes.   They do not apply to Final Salary pensions (Defined Benefit) or Government pensions.

No need to buy an annuity.  This can be very helpful although the option still exists where needed. The alternative is to withdraw all or part of your pension, although you will pay tax in the UK, anything above 25% of the value of the pension, at your highest marginal rate.   It is not yet clear how this will be treated for Spanish Tax purposes.

HMRC Budget 2014 Pension Announcements

Budget 2014: Greater choice in Pensions Explained – Good graphic of explanation of current pension system

HM Treasury: Freedom and Choice in Pensions – Comprehensive document

The New ISA (NISA)

The existing ISA regime will be replaced by the New ISA rules on 1st July 2014.   It will be known as NISA.  These rules allow £15,000 each UK tax year to be added to a NISA.  The choice has been improved as the restrictions on the balance between a Cash and Stocks and Shares NISA have been removed. You can also make a transfer from the existing ISA to a NISA.  These rules appear straightforward and will undoubtedly be beneficial.

HM Treasury: Factsheet on the New ISA (NISA) – Easy to understand

HM Treasury and HMRC: Creating a simpler, Fairer Tax System – Interesting and gives more of a complete view

For those of us in Spain, remember that NISAs and ISAs are UK tax exempt savings plans available to UK tax residents, not Spanish Tax Residents.

For those of you who like this sort of thing, here is the complete Budget 2014 Report as laid before the House of Commons by the Chancellor of the Exchequer. 

For our international clients from other countries, we apologise for the UK centric nature of the post but it is important to UK nationals living in Spain.

For further advice on the changes, pensions, QROPS and financial planning in Spain please feel welcome to email



Author: Barry Davys


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