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Private P Consumer Easter Monday saw the Champion for a generation. The p
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Plus by accessing your funds e than needed you can reduce y ability to make future contributi Yet you’re saying if I want to, just take out all the cash? If y choose to yes, but remember on of it is tax-free. The rest is taxed current income tax rate like sala if you take a huge whack, just lik earn more, some of it will push the higher tax bracket. See the tax calculator at www.mse.me/ta to see the various levels. If I don’t want to take it all ou can I do? There are many opt some of them can be combine here’s the main ones. Option 1: Leave it in your pens when you need it. Then each t withdraw, 25% of that amount free. Eg, if you had £100,000 a took £20,000 out you’d get £5, it tax-free, the rest would be ta your current rate. Option 2: Take 25% tax free, th a flexible income drawdown product. This is a product you keep the rest invested so it can hopefully grow, but you can als to take income when needed. H you get the first 25% you withd free and then the rest is taxed you take it – possibly useful if y likely to be in a lower-tax brack you’re older. Option 3: Take 25% tax free, th an annuity. This gives you a guaranteed income each year rest of your life. There are diffe charges on all of these, and it’s important to check them out an always compare different provi Eh, I thought annuities were dead as a dodo’s granny? Ac annuities are a decent concept get the security of knowing exa how much you can spend each and that it’ll last for the rest of y The problem is the rates have crap, and 60% of people just g from their pension provider rath than checking for better deals, especially people with poor he who could’ve got much better rates. Yet done right, with som your pension, it can be a usefu for security of income for life.
My Local Magazine Pension freedom sounds like something from Braveheart – what’s actually happening? I suspect George Osborne does picture himself as a financial freedom fighter. Yet only time will tell whether these reforms will paint him as the man who liberated older savers, or who exposed them to huge risk. This is all about how you use your pension savings. As always you can
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lump To-Do’s take a quarter Reviews of it as a tax-freeand Issue 66 | November 2016 | The BEST of Middlesbrough’s Business,sum. News, Yet for decades most people
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have effectively needed to use the remainder of the money to buy an annuity – a product that pays you an income each year until you die. Now anyone aged 55 and over can take the whole amount as a lump sum, paying no tax on the first 25% and the rest taxed as if it were a salary at their income tax rate.
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Does it apply to all types of pension? No, we’re only really talking private pensions where you and/or your employer saved up a pot of cash for retirement. Technically these are known as ‘defined contribution’ or 'money purchase' pensions. It doesn’t apply to the state pension, nor in the main part does it apply to pensions where what you’re paid is a proportion of your final salary – known technically as ‘defined benefit’ pensions.
There are ways to convert these final salary pensions into a pot of cash (be very careful of scammers), but don’t do it without genuine independent financial advice Is it worth taking out my pot as soon as I can? Usually not. If you’re in your 50s or early 60s you’re probably still working towards retirement and should be focusing on putting yourself in a position to have enough income when you do retire – so you want your pension to keep growing.
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