Re: Summer issue | Page 24

Should you cash in your pension to buy a property? Following the budget there has been a lot of talk around the increased flexibility that is to be introduced around how you can take your pension benefits. I’ve heard a number of people say “At last - I will be able to cash my pension in and buy a property to fund my retirement”. Quite why anyone would want to do this is beyond me. Let’s assume after April 2015 someone has a fund of £200,000. You can have 25% tax free with the remainder being added to your income in the year or years that you take it. If you took the whole £150,000 in one go, you are going to lose your personal allowance, meaning some of that income is taxed at 60% and if you have any other income at all some of it will be taxed at the additional rate of 45%. However, you plan carefully, take the income over a couple of tax years and only pay 40% tax on the income. This means you are left with £90,000 from the taxable portion, which leaves a total fund after tax of £140,000. Then you find a property to buy, remember you’ve got stamp duty and solicitors fees to pay so realistically you can buy something in the £135-£138,000 bracket. Locally that buys you a one bed flat that will rent for around £600 per month. If we assume you don’t pay an agent and do all the management work and tenant finding yourself, never have a month without a tenant nor a repair bill to pay, that gives you £7,200 per year. Of course the income is taxable so, assuming you’re a basic rate taxpayer, you are left with after tax income of £5,760, or a net yield on your starting amount after tax of 2.88%. To make things even worse you are now dependent on the fortunes of one person (or maybe two if rent to a couple) for your entire non-state retirement income. If they lose their job you likely lose your income too! Compared to a diversified portfolio of bonds, shares and property held through a pension and with the income drawn tax efficiently through “phased drawdown” cashing in your pension and buying a property may easily be the biggest financial mistake you could make. By Richard Cohen nsurefinancial.co.uk 24 The Court Service in crisis It must be very difficult for a client when he or she asks her lawyer “when is my matter going to be dealt with” or “why is the court taking so long with my case” and the response from the lawyer seems to be vague or possibly even evasive. Perhaps a lot of clients might be tempted to think “typical lawyer – unable to give a straight answer to a straight question”!  However, sometimes even the stereotypical  slippery lawyer might just have a point when he or she says in answer to that question, “I don’t really know” or “it’s the court that is holding matters up”. Dealing as I do with Family work and Personal Injury (Accident claims) work, I’ve noticed a marked deterioration in the level of service that the courts have been able to provide over the last couple of years. Let me say straight away that no reasonable lawyer would lay any blame for this at the feet of the court staff and the judges who all do a very difficult and extremely demanding job under great pressure and with little support or appreciation I suspect. However, reduced funding and staffing levels appear to be to blame. The court service is a loose term for Her Majesty’s Courts and Tribunals Service or HMCTS. That was formed a few years back by a merger of the courts and tribunals sectors. In 2011, more than 1,200 posts were cut by HM Courts and Tribunals Service just as it faced an upsurge in workload caused by rising numbers of litigants in person (people going to court without a lawyer). Full-time equivalent staff numbers at HMCTS were 19,535 in November 2011, a drop of 6% on the same date in 2010 when the then separated courts and tribunals sector employed 20,772 people. By July last year HMCTS had lost 4,333 people, or 19 per cent of its workforce since 2011, figures showed. the court service in particular is not a headline grabber but it is an area where one could say “you’ll miss it when it’s gone”. People might react with more urgency, concern and anger if cuts were made to the NHS or to education in the way that they have been to the court service but for those of us that have to use the courts on a daily basis, whether professional or lay people, the drop in standards and service is now being felt massively and there is no end in sight. There is now talk of privatising the court service. If previous examples of private enterprise running important public services is anything to go by (the security fiasco in the run up to the London Olympics and long before that, prison security being handed over to Group 4 spring to mind) then we should all live in fear of this development. By Stephen Wilmot Thus the root of the problem lies, I am afraid, with our current government and perhaps several of its predecessors. Maybe legal services in general and 25