Complete control


Since April 2015 anyone over the age of 55 with certain types of pension can take the whole of their pension fund as a lump sum. Usually, 25% is tax-free, with the balance taxed as income. This has been widely referred to as "pension freedom".
Whilst we would not expect many to access the whole of their pension fund in one go, the new flexibility offered, along with changes in the death benefits, have made pension funding a very attractive method of saving.

For those over 55, there are 3 basic options;

1. Withdraw the whole fund

...or part of it – each time funds are withdrawn, 25% will be tax-free and the balance taxed as income.

2. Take the 25% tax-free cash

and then use flexible income drawdown to retain an invested fund and draw out taxable income and/or lump sums as and when required.

3. Secure an income for life

Take the 25% tax-free cash and then "secure" and income for life via an annuity.

Pass it on


Changes to death benefits now mean that it is possible to pass on your pension fund to another person on death, tax-free if you die before 75. If you are over 75, the recipient will have to pay income tax when they withdraw any of the money. In either case, the transfer is not usually subject to inheritance tax.

The new "freedoms" apply mainly to those with a pension fund, where they and/or their employer have paid money in to accumulate a sum to use at retirement. The same freedoms are not generally open to those with "Final Salary" pension schemes, which pay a defined benefit at retirement based on your earnings and length of service.

Planning ahead


Planning ahead is key and not all schemes will offer the full flexibility and it can take a number of months to put the most appropriate plan in place.

With so many options, it is important to take impartial professional advice which takes account of your personal circumstances, taxation and death benefits, to ensure that the best solution is achieved.

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