Drawing Pension Income
What you need to know if you are at retirement or thinking about retirement
The government proposed pension reforms in the March 2014 budget which change the current rules in significant ways.
If you are nearing retirement, it is important you take these changes into account.
The biggest change was the proposal to allow individuals aged 55 or above to take the whole of their pension pot as a cash lump sum from April 2015 - There are some very important tax consequences to consider - please seek financial advice.
Currently, although you don't have to buy an annuity with your pension pot you are not allowed to withdraw it all as a lump sum unless it falls under specific rules governing 'small pots' (see below explanation of small pots). There are a range of options to choose from if your pension fund is not considered a 'small pot' - including buying an annuity.
Greater freedom, more choice
Sutton McGrath Hartley Financial Services feel that the freedom afforded by the proposed budget changes is a good thing as it will encourage more people to actively think about their money in retirement and consider the choices that are available to them.
Annuities, particularly enhanced annuities continue to be a good solution for those who want the certainty of a secure, guaranteed income for life that they won't outlive. Because of this, they will continue to be the cornerstone of many people's retirement income.
Getting the best value from your pension
What is important is to get the best value from your pension.
As you can see, these pension changes will offer you far more freedom over the decisions you make about your retirement.
If you require more information or advice as to how these changes may affect you, please speak to us.
Small pots: immediate changes
The March 2014 budget introduced more flexibility for people with smaller pension pots to draw them as a lump sum, effective from 27 March.
Under these new rules, if your pension pots across all your arrangements total £30,000 or less, you can take the whole of it as a lump sum, from age 60. This has increased from £18,000. Pots of up to £10,000 each can also be taken as a lump sum (up to three such pots). Find out more here: Tax free lump sum.