FG BUY&SELL        FARMERS WEATHER       ARABLE FARMING        DAIRY FARMER      FARMERS GUARDIAN        AGRIMONEY        OUR EVENTS        MEMBERSHIP BENEFITS        BLOGS        MORE FROM US

You are viewing 1 of your 2 free articles

You’ll need to join us by becoming a member to gain more access.
Already a Member?

Login Join us now

Finance tips: Greater pension flexibility could offer dairy farmers lifeline

Insights

Greater flexibility over pension rules could help dairy farmers to supplement their income during the current downturn. Stuart Coombe, from accountant Old Mill, explains.

Twitter Facebook
Share This

Could felxibility be the key when it comes to pensions? #dairy #pension

Dairy farmers facing a temporary downturn in profitability could benefit from greater flexibility over pension rules, by supplementing their income from their pension fund.

 

Although not a long-term solution to unprofitable businesses, farmers over the age of 55 could use their pension to see them through a difficult period. Recent changes to the pension rules mean they are much more flexible to use now. From the qualifying age farmers can take as much or as little from their pension fund as they like, which can be extremely useful in times like this.

 

Farmers can take a 25% lump sum tax-free, after which drawings will be subject to Income Tax at the usual rates. They should also be aware that once they have started drawing from their pension, they can then only top up £10,000 a year tax-free compared to the usual maximum of £40,000.

 

Having a pension is all about saving for retirement, so taking money early should not be done lightly. It is important to look at all your financial options and assets, and have a robust budget and cash flow forecast so you know you are not pouring good money after bad.

 

Other changes to the pension regulations mean farmers can now pass on their pension fund to the next generation tax-free. Pension funds used to be taxed at 55%, so that is a huge saving. It’s particularly useful where farmers have put land and other assets into a self-invested personal pension. In the past they were very difficult to pass on but now it’s a lot easier to plan ahead for inheritance.

 

  • Expert opinion: Other changes to the pension regulations mean farmers can now pass on their pension fund to the next generation tax-free

 

Assets can effectively remain in the pension fund indefinitely: If the pension holder dies before the age of 75 the fund is passed on tax-free, and all subsequent drawings from it will also be tax-free. However, if they die after the age of 75, while the transfer is tax free, any subsequent drawings will be subject to Income Tax. The fund effectively becomes the successor’s pension but they don’t have to wait until retirement to draw from it.

 

However, many of the new benefits do not apply automatically, so it’s essential that farmers are proactive and fill out a nomination form, identifying who they want to inherit their pension after their death.

 

Other changes mean people can cash in existing annuities for a lump sum, and can choose whether to keep their funds invested or use them to purchase an annuity to take a guaranteed payment for life.

 

Annuities cannot be passed down the generations in the same way as a lump sum, but don’t rush to cash in your pension, as many older schemes have extremely attractive annuity rates of up to 15% a year. You won’t get that sort of return anywhere else, so be very careful – make sure you understand the full implications before making any changes.

 

Twitter Facebook
Rating (0 vote/s)
Post a Comment
To see comments and join in the conversation please log in.

More Insights

Technology saving calves in Mid Wales

Cameras and co-operation are helping to improve suckler cow performance on a Welsh livestock holding. Barry Alston reports.

Somerset farmer predicts change in livestock feeding

Keith Barrow, Somerset, has changed the way he feeds his cattle and has reduced costs, improved nutrition and opened opportunities elsewhere on-farm. Ann Hardy reports.

Welsh farmers bring hills to life with hydroelectricity

Wales has two things in abundance – hills and rain. Barry Alston meets up with a beef and sheep farming couple making use of both to generate additional income.

Organic dairy farmer taking lessons from his travels

Thomas Edwards was offered the opportunity to meet international young farmers and share ideas for best organic practice. Beth Dixon finds out more.

Gallery: A vivid history of rural life in The Lakes

Travelling up to 200 miles a week by taxi to different parts of the Lake District, Joseph Hardman captured the farming calendar in more than 50,000 photographs. Farmer’s daughter Anne Bonney has rectified his legacy and here shares some of her favourite images.
FG Insight and FGInsight.com are trademarks of Briefing Media Ltd.
Farmers Guardian and FarmersGuardian.com are trademarks of Farmers Guardian Ltd, a subsidiary of Briefing Media Ltd.
All material published on FGInsight.com and FarmersGuardian.com is copyrighted © 2016 by Briefing Media Limited. All rights reserved.
RSS news feeds