Latest news with #MoneyPurchaseAnnualAllowance
Daily Mirror
16-07-2025
- Business
- Daily Mirror
Millions of over-60s told 'withdraw cash and move it' amid cost of living crisis
Mistakes over-60s are making include not claiming DWP benefits they are entitled to - like Pension Credit or the state pension. Others include drawing from a private pension while still paying in A crucial alert has been issued for millions of UK households aged over-60. Those above 60 are being urged to "act now" to prevent missing out on vital funds as the Cost of Living crisis persists across the nation. Blunders that over-60s are committing include failing to claim Department for Work and Pensions (DWP) benefits they're eligible for, such as Pension Credit or the state pension - if aged over 66. Additional errors involve withdrawing from a private pension whilst continuing to contribute, which can activate the Money Purchase Annual Allowance (MPAA) and slash your tax-free pension contribution ceiling from £60,000 to merely £10,000 annually. Families are advised to steer clear of making flexible withdrawals (such as UFPLS or income drawdown) where possible, and urged to examine interest rates on their banking accounts, as many currently sit below one per cent interest. Households can extract cash and transfer funds to an easy access savings account, with some offering up to 4.98 per cent. As an alternative, over-60s can deposit their money into fixed-rate ISAs and bonds providing up to 4.58 per cent, reports Birmingham Live. Funderer's chief analyst commented: "Many over-60s are unknowingly leaving money on the table. These aren't complicated strategies - they're simple steps that can have a big impact on financial security in retirement. Acting now can make your money last longer and give you peace of mind." Mark Hicks, head of savings at Hargreaves Lansdown, has stated: "Given that markets now expect two or three more rate cuts for the remainder of the year, savings rates are likely to continue trending downwards in the months to come, and fixed rate deals above 4.5% may not be around for much longer. "For savers, this means keeping an eye on your savings rate, and being prepared to switch. You need to keep your emergency fund in easy-access savings, which are likely to drop. "However, some banks will be in more of a hurry to cut rates than others, so you could more than double the rate from a pedestrian high street giant by shopping around among online banks and savings platforms. "For money you don't need for longer, this is a decent opportunity to consider fixed rate savings. Fixed rate deals, which guarantee the rate for a specific period – from a couple of months to five years – will let you lock in a rate for the duration. "These have come down from the peak, but you can still make around 4.5%, and as easy access deals get less generous, these deals will look increasingly attractive. "It means anyone who has money they don't need for a fixed period of a few months or longer should consider tying it up for a better rate."
South Wales Guardian
14-07-2025
- Business
- South Wales Guardian
How to avoid pension mistakes that could cost you thousands
Five key errors are leaving pensioners out of pocket every year, including missing government top-ups, drawing pensions too early, and leaving savings in low-interest accounts. These are the most important mistakes - and a fix for each - to help your retirement income stretch further: More than 800,000 pensioner households in the UK are still not claiming Pension Credit, despite being eligible. That's an average of £3,900 per year going unclaimed — money that could boost income and unlock further benefits. The fix: If you're over State Pension age and your income is under £201 per week (single) or £307 (couple), use the Pension Credit calculator or contact Age UK to check eligibility. It could also entitle you to help with energy bills, NHS costs, and housing support. Many people start claiming their State Pension at 66 (although this is rising), unaware they could receive significantly more by waiting. The fix: Experts at Funderer say: "Delaying your State Pension increases payments by 5.8% for every full year deferred. Based on the full new State Pension of £230.25 per week, that's a boost of around £700 a year for life after just a one-year delay. Deferral can be especially worthwhile if you're still working or have other income." Drawing from a private pension while still paying in can trigger the Money Purchase Annual Allowance (MPAA) — cutting your tax-free pension contribution limit from £60,000 to just £10,000 per year. The fix: Avoid flexible withdrawals (like UFPLS or income drawdown) until you're sure you won't want to keep paying into your pension. Once triggered, the MPAA is permanent. Martin Lewis advises seeking guidance from Pension Wise or an adviser before accessing your pot. Many retirees keep cash in accounts earning under 1% interest, losing real value due to inflation. The fix: Move your money. As of July 2025, top easy-access savings accounts pay up to 4.98%, and fixed-rate ISAs and bonds offer up to 4.58%. Moving just £20,000 from a 1% to 4.5% account could earn an extra £700–£900 per year. Recommended reading: HMRC issue urgent scam warning for Winter Fuel Payment texts The 'must-follow' summer advice from Martin Lewis Martin Lewis says 'don't pay to pay' on holiday Beyond pensions, many over-60s fail to claim additional benefits they're entitled to — from free NHS prescriptions to the winter fuel payment, council tax reductions, and more. The fix: Use trusted tools like EntitledTo or Age UK's benefits checker to find out what you could be claiming. In some cases, you may be missing out on hundreds of pounds annually in overlooked perks. 'Many over-60s are unknowingly leaving money on the table,' says Funderer's lead analyst. 'These aren't complicated strategies — they're simple steps that can have a big impact on financial security in retirement. Acting now can make your money last longer and give you peace of mind.'
Leader Live
14-07-2025
- Business
- Leader Live
How to avoid pension mistakes that could cost you thousands
Five key errors are leaving pensioners out of pocket every year, including missing government top-ups, drawing pensions too early, and leaving savings in low-interest accounts. These are the most important mistakes - and a fix for each - to help your retirement income stretch further: More than 800,000 pensioner households in the UK are still not claiming Pension Credit, despite being eligible. That's an average of £3,900 per year going unclaimed — money that could boost income and unlock further benefits. The fix: If you're over State Pension age and your income is under £201 per week (single) or £307 (couple), use the Pension Credit calculator or contact Age UK to check eligibility. It could also entitle you to help with energy bills, NHS costs, and housing support. Many people start claiming their State Pension at 66 (although this is rising), unaware they could receive significantly more by waiting. The fix: Experts at Funderer say: "Delaying your State Pension increases payments by 5.8% for every full year deferred. Based on the full new State Pension of £230.25 per week, that's a boost of around £700 a year for life after just a one-year delay. Deferral can be especially worthwhile if you're still working or have other income." Drawing from a private pension while still paying in can trigger the Money Purchase Annual Allowance (MPAA) — cutting your tax-free pension contribution limit from £60,000 to just £10,000 per year. The fix: Avoid flexible withdrawals (like UFPLS or income drawdown) until you're sure you won't want to keep paying into your pension. Once triggered, the MPAA is permanent. Martin Lewis advises seeking guidance from Pension Wise or an adviser before accessing your pot. Many retirees keep cash in accounts earning under 1% interest, losing real value due to inflation. The fix: Move your money. As of July 2025, top easy-access savings accounts pay up to 4.98%, and fixed-rate ISAs and bonds offer up to 4.58%. Moving just £20,000 from a 1% to 4.5% account could earn an extra £700–£900 per year. Recommended reading: HMRC issue urgent scam warning for Winter Fuel Payment texts The 'must-follow' summer advice from Martin Lewis Martin Lewis says 'don't pay to pay' on holiday Beyond pensions, many over-60s fail to claim additional benefits they're entitled to — from free NHS prescriptions to the winter fuel payment, council tax reductions, and more. The fix: Use trusted tools like EntitledTo or Age UK's benefits checker to find out what you could be claiming. In some cases, you may be missing out on hundreds of pounds annually in overlooked perks. 'Many over-60s are unknowingly leaving money on the table,' says Funderer's lead analyst. 'These aren't complicated strategies — they're simple steps that can have a big impact on financial security in retirement. Acting now can make your money last longer and give you peace of mind.'
Scottish Sun
17-05-2025
- Business
- Scottish Sun
The £1 pension trick that could save you thousands on your tax bill
Some savers have been hit CASHING IN The £1 pension trick that could save you thousands on your tax bill Click to share on X/Twitter (Opens in new window) Click to share on Facebook (Opens in new window) A CLEVER £1 pension trick could stop you from losing thousands in emergency tax when withdrawing from your pension. Across the UK, many over-55s are at risk of overpaying tax when they take out lump sums from their pensions. Sign up for Scottish Sun newsletter Sign up 2 Some providers allow £1 withdrawals online, but others may require a paper form Credit: Getty In just the first three months of 2025, pensioners reclaimed a staggering £44 million in overpaid tax, according to HMRC. That's an average of nearly £3,000 per person. This happens because when people take out money from their pension for the first time, HMRC doesn't always have an accurate tax code for them. So instead, it applies an emergency tax, assuming the amount withdrawn will be repeated every month for the rest of the year. The result? You can end up paying much more tax than you actually owe. For example, someone taking out £20,000 might be taxed over £7,000, when they should really only pay around £1,500. The extra money can be claimed back, but it often takes months and requires filling in complicated forms. That's where the £1 pension trick comes in. By withdrawing a small amount first, as little as £1 in some cases – HMRC is prompted to issue an up-to-date tax code. Once that code is in place, any further withdrawals are taxed correctly from the start. Pensions expert Clare Moffat, from Royal London, told the Express that the exact amount needed varies depending on the pension provider. 'It could be £1, £50 or £100 – but the idea is to make a small withdrawal first to get a tax code sorted before taking a large sum,' she said. Some providers allow £1 withdrawals online, but others may require a paper form. It's worth checking in advance to avoid delays or confusion. David Gibb, a chartered financial planner, warned that this emergency tax is down to a glitch in the PAYE system. 'It's a hangover from how regular wages are taxed. "But for one-off pension withdrawals, it doesn't make sense – and savers lose out.' The trick isn't perfect. In some cases, even with a tax code, emergency tax may still be applied. But it can significantly reduce how much you overpay and the stress of claiming it back later. If you're planning to take out a lump sum for a big purchase, like a new kitchen, home repairs or a holiday, knowing this trick could keep more cash in your pocket. However, experts also warn to think carefully before dipping into your pension early. Withdrawing taxable income could reduce your pension pot and even trigger the Money Purchase Annual Allowance (MPAA), limiting how much you can pay back in later, from £60,000 a year to just £10,000. This could be a big deal for people in their 50s and early 60s who are still working and putting money into their pensions. It's also important to remember that once you take money from your pension, it may affect other benefits or entitlements, so it's worth getting advice.
