As Christmas and the New Year loom large, there may be questions around the dinner table over the festive period about your retirement, and when you’re planning to take a step back and relax. We recognise that these questions can often be quite daunting, particularly if you’ve not thought about it in any great detail, or are confused by the options available to you. What does retirement mean to you? Will it mean more time for playing golf? Does it mean having the money to buy an Aston Martin as a retirement present to myself? Will it mean having to work part-time to ensure you’re financially stable? Arguably the most important question though, is ‘what do I do with my pension?’.
With so many options when it comes to pensions, mainly as a result of the new pensions freedoms, it can be a bit of a minefield, and so it is important to get professional advice before making such an important decision.
When the time comes to retire, there are several options where your pension is concerned.
- Take a lump sum payment.
Most schemes allow the holder to take a cash lump sum from the pot at retirement. You’ll get an allowance of 25% before being taxed.
- Take a steady income.
With this option, your pension remains invested and you take an income from it on a regular basis. The most common ‘Income Drawdown’ pension is a flexi-access drawdown, which was first introduced in April 2015. As the name suggests, this scheme is flexible, with no limit on how much income you choose to take from your drawdown funds.
- Purchase an annuity.
An annuity is an insurance policy which gives a guaranteed income for the rest of your life. With an annuity, you can take 25% of your pot as tax-free cash and buy an annuity with the other 75%, but you also pay tax on your annuity income.
- Invest it.
Another option when it comes to pensions is to simply leave it invested. There are many choices with investment, for example you could stay invested in part, and use some of the withdrawal elsewhere, investing in shares and bonds.
If you’re still in a dilemma about your pension, then don’t panic, we’re on hand to offer you further advice on pensions and the options available to you. Please call us on 01484 448019, or email us email@example.com, to make an appointment.