Options at Retirement
If you are planning to retire or semi-retire, you are probably thinking about how best to take your pension(s), as well as the best way to maximise your income at this stage of your life.
There is no doubt that for most people this is one of the biggest decisions in their lives and it is my role to place you in an informed position and help you make the right choices, ensuring you do not miss an opportunity (or commit a fundamental error) in maximising your retirement benefits.
Fundamentally, there are two broad options available with the type of pension that provides a pot of money (money purchase as opposed to a final salary scheme) when one retires or semi-retires.
While a final salary, quite rightly, is considered the gold-standard pension we would all like to have, there are times when it may be appropriate to move these benefits to a personal pension depending on circumstances.
You can buy a Guaranteed Annuity for life with your pot of money™ or you can drawdown a portion of your funds on a regular basis, subject to government limits and ensuring you don’t spend all your pension funds before you die, to provide income streams and lump sums in your retirement whilst leaving the remainder of your funds invested and working for you.
With the introduction of the pension freedom legislation in April 2016, the limits on how much you can take from your pension became unrestricted. However, in practise the tax on withdrawals (along with sustainability considerations) limit how much you can take in any single tax year, depending on your situation at that time and in the foreseeable future.
There are many variables and combinations between the two options that may be suitable for your needs and circumstances. I can place you in an informed position, ensuring that you are both confident and comfortable with your retirement provision.
Both Guaranteed Annuities and Drawdown, as well as the options in between, should allow you to take 25 per cent of the fund as a tax free lump sum. Some policies may allow you to take more, whilst others restrict this amount. If this is the case, then it makes sense to review this sooner rather than later in your retirement planning.
Questions you may wish to address
Some questions you may wish to address include:
- Can I take may pension now or would it be better to defer it until I am older?
- Can I take early retirement and what would be the cost?
- Is it better to take the maximum tax-free cash or more pension income?
- My pension has guarantees; is this always a good thing or could it actually be a liability?
- Would my current pension pay the best income or would I be better off shopping around and transferring to another provider?
- Can I take the tax free cash now, carry on working (even part time) but leave the rest of my pension until I fully retire?
- Is it best to take a pension annuity with a guaranteed income for life or should I consider a more variable income stream which could be more or less depending on future investment returns?
- What is the most tax efficient manner in which I can take my pension(s), particularly as I have other income streams?
- Would my health affect my entitlement to my pension benefits giving me more or less than if I were in very good health?
- How should I provide for my family in the future?
With sound professional advice, I can help you find the answers to these questions and others.
If you have a question or would like to arrange an initial meeting at no cost and without obligation, call Nigel on (01295) 660571 or request a call-back.