The Pension freedom changes of April 2015 represented a complete shake-up of the UK’s pensions system, giving people much more control over their pension savings than before.
We’ve put together 5 top tips to ensure you’re making the most of your pensions freedom.
1. Understand your State Pension
The State Pension continues to be most people’s biggest source of income in retirement. But the State Pension and the age at which you are entitled to this money is changing. Check your entitlement here.
2. Take your time in deciding what to do with your pension
You may have spent 40 years saving for your retirement. Take more than 40 minutes considering your options.
3. Obtain professional financial advice about what you can do with your pension pot
There are a number of different ways you can take your defined contribution pension pot. You can usually take 25% of your pot tax-free from age 55. Your options are:
- Leave your whole pot untouched
- Guaranteed income (annuity) – use your pot to buy an insurance policy that guarantees you an income for the rest of your life – no matter how long you live.
- Adjustable income – This option is also known as ‘flexi-access drawdown’. You move your pension pot into one or more funds that allow you to take a taxable income at times to suit you.
- Take cash in lump sums – take smaller sums of money from your pot until you run out.
- Take your entire pot in one go
- Choose a mixture of these options
4. Consider your life expectancy
Pension savings are intended to last the rest of your life, yet we typically underestimate how many years we may live. According to reports, a woman’s life expectancy in England from birth remains 82.9 years, and for a man, it is 79.2.
5. Approach final salary pension transfers with caution
If you have a final salary pension, you will need to transfer it elsewhere to access the freedoms. This is a significant decision, as you could lose important benefits. Such a decision should be approached with caution and with the guidance of professional financial advice.
Do you need help on what to do with your pension?
If you would like any further help or advice on what to do with your Pension, please contact Chris Slatter on firstname.lastname@example.org or 01295 250401.