If you’re planning for your retirement, you may be interested in new UK regulations that offer increased flexibility when it comes to how to manage your pension pot.
Whether you’re planning to carry on working full time for a little longer, cut back to part time or are planning to retire completely, the new regulations give you the power to choose when and how you use your pension, so you can tailor your choices to your individual retirement plans.
Here’s a Rundown of the Options Available:
Leave your pension where it is: You can delay taking your pension, giving it more opportunity to grow without you having to pay tax on it. There is potential for your pension to grow further and therefore provide more income when you do choose to access it in the future.
Use your pension to buy an annuity, offering a guaranteed income for life: There are several different types of annuity that will offer different benefits and varying levels of income. Some will also let you choose to provide a life-long income for a dependent or other beneficiary after you die.
Access your pension with flexibility: Flexi-access drawdown enables you to take up to a quarter of your pension as a tax-free lump sum and then re-invest the remaining funds to provide a retirement income. Unlike a lifetime annuity, your income would not be guaranteed for life, so you would need to play an active role in the management of your investments.
Withdraw your full pensions: You can also choose to withdraw your full pension all in one go. The first 25% would be a tax-free sum, the remainder would be treated as taxable income. This could leave you with a hefty tax bill, so it’s worth thinking this option through carefully, however, with some property investments offering an annual return of as much as 7%, investing your pension in property could see a much more favourable return than many traditional financial investment currently on offer.
Whichever option, or combination of options you decide on, it’s important to think about your personal circumstances and how you want your pension to work for you throughout your retirement.
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