The value of pension and the income they produce can fall as well as rise. You may get back less than you invested.
Tax treatment varies according to individual circumstances and is subject to change.
As life expectancy and the state pension age are both increasing it becomes even more crucial that you make an informed choice regarding your pension.
Here at IP Wealth Management we have given honest, clear pension advice to thousands of our clients over the years. Indeed, our expertise has been acknowledged by Money Helper. Money Helper provides consumers who need financial advice with access to their Retirement Advisor Directory and we have been given permission by both these bodies to use their logos on all our sites.
The pensions industry went through a massive transformation with rules introduced by the government back in April 2015. These rules allow more choice and flexibility for retirees as to when and how they can take their pensions. Although the flexibility is a great opportunity for many there are hidden pitfalls. Choosing a suitable pension has always been a very complicated matter and the flexible rules have increased the complexity making it essential to seek clear, professional advice if you are thinking of accessing your pension in the near future.
If you are over 55 and have a defined contribution scheme you can tailor when and how to use your pension pot and when you wish to stop saving into it.
When it comes to using your accrued pension pot there are basically five different options to choose from. However, you can also use a combination of these options depending upon your own personal circumstances. You will need to work out which option or combination will provide you and any dependant with a reliable, tax-efficient income throughout your retirement.
Option 1
You can leave your pension untouched - defer taking it. It will continue to grow tax-free.
Option 2
You can use your pension pot to buy a guaranteed income for life- an annuity. With this option you can choose to take 25% as a tax-free lump sum and convert the rest into an annuity. There are various types of annuity. Some will allow you to provide a lifetime income for a dependant if you were to die.
Option 3
You can use your pot to provide a flexible income in retirement. This is known as flexi-access drawdown. As before, 25% is tax-free with the rest being invested to provide a regular taxable income. You can set the amount you want to receive and this can be adjusted according to changing circumstances. However, this income is not guaranteed for life.
Option 4
You can take small cash sums from your pot. Taking the cash when you need it and leaving the rest untouched to achieve tax-free growth. As before, the first 25% of each withdrawal is tax-free. However withdrawals could incur charges and there may be a limit as to the number of withdrawals that can be made in any one year. Any money left won't be reinvested to pay a regular income and can't be passed on to any dependants should you die. This option also has tax implications.
Option 5
You could opt to take your whole pot as a cash lump sum. The first 25% would be tax-free however the rest would be taxed at your highest rate. This option could leave you facing a large tax bill. Another downside of this option is you could run out of money and your dependants would not receive a regular income should you die.
Retirees can choose any of the above options or a combination of any of the options. As there are so many different permutations it is advisable that you take expert advice before making any decision. At IP Wealth Management we have the expertise to guide you through the whole process. We realise that there are many factors influencing what may be the best option for you and we will endeavour to help you make the very most suitable decision for your particular circumstances.
At IP Wealth Management we treat all our customers as individuals and recognise that different options may be appropriate for different people depending upon when you wish to stop working or if you just want to reduce your hours. Your age and health may also be a factor to consider as is whether you have dependants. Another key factor could be your objectives and attitude to risk. Our trained advisors will help to talk you through all your options before making any informed decision.
At IP Wealth Management we have expertise in dealing with all types of pensions from personal pensions and self-invested personal pensions right through to occupational pension schemes. Don't leave your retirement to chance - contact the experts at IP Wealth Management.
IP Wealth Management Limited is an appointed representative of Quilter Financial Services Limited and Quilter Mortgage Planning Limited which are authorised and regulated by the Financial Conduct Authority.
