Everything you need to know about recent changes to pensions and what they mean for your retirement.
Freedom and choice with your pension income
Back in the 2014 Budget, the Chancellor announced a series of changes that significantly impact the decisions you face at retirement. If you are 55 or over with pension savings in a defined contribution plan you now have more flexibility than ever before.
What does this mean for me and my retirement?
- You can buy an annuity or leave your pension savings invested and withdraw money whenever you want (with no limits on how much you take or when).
- You can withdraw all of your money from your pension pot and do whatever you want with it (only 25% will be tax-free, the rest will be taxable).
- You can take all your pension savings and spend it in any way you choose.
Things to consider
There are other changes too:
- A government service called Pension Wise has been set up to give free guidance on the options available. To book an appointment call: 0800 138 3944 (8am to 10pm everyday) or visit pensionwise.gov.uk.
- If you die before age 75 there will be no tax on any benefits payable to your beneficiaries (as long as paid out within two years).
- On death after age 75, any money paid out will be added to the income of the person who receives it (and taxed accordingly).
- A new state pension scheme started in April 2016. Most people retiring after this date will receive a maximum flat rate payment of £175.20 each (2020/21 Tax year). Find out more about the State Pension.
Any references we make to taxation are based on our understanding of current legislation and HM Revenue & Customs practice, which can change.
Have we got you thinking?
Take a look at our other handy guides on pensions and retirement