GREATER FLEXIBILITY IN ACCESING YOUR PENSION FUNDS

Pension drawdowns is a flexible way of taking income from your pension, introduced after the pension freedom rules in April 2015. Before that, the government limited how much income you could take from your pension unless you had other sources of income, and annuities were commonly used to provide a guaranteed income for life.

Nowadays, you have more flexibility in accessing your pension funds, allowing you to take as such or as little as you want. However, you must be aware of potential tax consequences if you withdraw the entire amount at once. Some individuals prefer to invest their pension funds for potentially high growth rates rather than opting for annuities or a combination of both options.

SPECIFIC TAX IMPLICATIONS TO CONSIDER

It’s essential to seek professional advice well before retirement to ensure that you have a clear understanding of your income requirements and how much you need to have invested to meet those needs. Doing so allows you to access your money in a way that suits your financial goals. Waiting until the last minute can make the process more challenging.

When accessing your pension, there are specific tax implications to consider. Once you reach the age of 55, you can take up to 25% of your pension completely tax-free. You don’t have to take the full 25% in one go; many people choose to drip their tax-free cash out slowly. This allows them to benefit from continued growth in the remaining pension while regularly accessing a portion of their tax-free cash efficiency.

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A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless plan has a protected pension age).

The value of your investments (and any income from them) can go down as well as up, which would have an impact on the level of pension benefits available.

Your pension income could also be affected by the interest rates at the time your take your benefits.

Your own personal circumstances, including where you live in the UK, will have an impact on the tax you pay. Laws and tax rules may change in the future.