From 6 April 2015, the government changed the ways you can access your pension fund. These changes, known as 'pension freedom', are available to anyone who is aged 55 and over with a personal pension or other suitable pension plan.
Under the new rules, one of the fundamental changes is the freedom to access your entire pension fund. This means you could take the whole amount as a cash lump sum or make income withdrawals from it through a number of new and enhanced options.
Here are a number of Pension Freedoms that could be available to you:
Leave your pension pot untouched - and take it later. Use it to buy a guaranteed income for life - called an annuity. The income is taxable, but you can choose to take up to 25% of your pot as a one-off tax-free lump sum at the outset.
Use it to provide a flexible retirement income - called Flexi-access drawdown' or 'income drawdown'. Take 25% of your pension pot (or of the amount you allocate for drawdown) as a tax-free lump sum, then use the rest to provide a regular taxable income.
Take several cash sums - the first 25% of each cash withdrawal from your pot will be tax-free. The rest will be taxed. Doesn't allow you to take 25% of your whole pension pot tax-free up front.
Take your pot as cash - the first 25% will be tax-free and the rest is taxable.
Mix your options - choose any combination of the above, using different parts of your pot or separate pots.
Everybody's circumstances are different and so it is essential that you seek advice and guidance before deciding which pension option is best for you.
Pension Wise is a free and impartial government service that has been set up to help you understand the new pension options available to you.
To find out more about what we can offer in the way of retirement planning, contact your Wesleyan Financial Consultant. Alternatively leave your details and we will call you.
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