Retirement Options

With the introduction of Pensions Freedom legislation in 2015, if you are over 55 you now have greater control over your pension savings. If you have a defined contribution pension you can normally withdraw funds from your pot with the first 25% tax free. You can also leave your pension pot to loved ones in the event of your death. With a greater amount of choice it becomes more important to get specialist advice.

Pension Freedom gives you more choice but due consideration needs to be given when considering the benefits, taxation and potential outcomes of any plan. We have highly qualified pension transfer specialists and retirement planners to ensure you are given the best advice.  We have outlined some of the options available to you below, however you are able to combine elements of all of these options.  There is also the choice of a phased retirement. This involves retiring gradually, taking part of your pension pot but leaving the remainder invested. 

Take a lump sum

This option involves a lump sum being paid, up to the full value of the plan.  If you take your entire pension as a lump sum you will not receive a regular income.  You would get immediate access to as much of your fund as you need.  Of the amount paid out, 25% is normally tax free with the remainder subject to income tax at your highest rate.  Despite there being no regular income you can choose when and how much of a lump sum you require. 

Withdrawing funds from your pension could mean you do not have a fund in retirement.  You must ensure you understand the tax implications before doing this. 

Drawdown your pension

Pension drawdown is an option if you do not need or want a guaranteed income at retirement.  If you are happy to accept the potential risk of keeping your pension funds invested, drawdown gives you greater flexibility around when and how much income you can take. You can take an income when you need it whilst still leaving your pension pot invested. When you take money out of your fund you have the option to take usually up to 25% tax free.

The greater flexibility it provides can be beneficial for tax purposes if you have other income or assets.  In addition if you die with funds still in your drawdown plan, these can be inherited by your loved ones.

With this option your money remains invested. It must be remembered that you could run out of money if your investments don’t perform as you had hoped or you take too much income too soon. Investments can fall and rise in value so your income will not be secure. Past performance should not be seen as an indication of future performance.

Purchase an Annuity

Purchasing an annuity involved using your pension pot to give you a guaranteed income for your retirement.  This option gives you a regular and secure income for life.  You can take a tax free cash sum at the outset if you wish. Your annuity income is paid at least annually and can increase, decrease or remain level in payment.  You will pay tax on your annuity income in the same way as you pay tax on a salary.

There are additional options you can add on at the start, including spouses benefits and guarantees, which would reduce your own income.  However, once you have purchased your annuity you cannot usually change your mind and alter the benefits or level of income selected.

 We can help you decide on the best pension options for you. It is important to remember that pensions are a long term investment. You may get back less than you put in. Pensions are subject to tax and regulatory change and depend on an individuals circumstances, therefore the tax treatment of pension benefits may be subject to change in the future.

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