Greater Pension Freedoms, Mean Greater Pension Responsibility
New pensions freedoms have meant that when planning your retirement, you have more flexibility than ever about what to do with your savings. However, with greater freedom, comes greater responsibility. Research by the Open University has shown that 70% of UK consumers are unable to answer basic GCSE level questions regarding finance. This is why we have partnered with the Open University to form The Centre for the Public Understanding of Finance. As people navigate the new reforms, expert advice and support is needed now, more than ever.
What Does This Mean for Your Pension Pot?
The reforms have meant that you now have more options as to how to make the most of your pension pot. In almost every case, 25% of the sum taken out will be tax free. After hitting 55, this investment can be used more freely, taking out sums, as and when needed.
The Ways You Can Access Your Pension
- Leave it. There is no rule that states once you hit your retirement age, you should start dipping in to your pension pot. You can leave it there until you need it
- An Annuity. You 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.
- Take the whole amount with 25% tax-free and the rest taxed as an income
- Take a 25% tax-free lump sum and draw the rest as a regular income, taxed at your marginal rate
- Draw a regular income with no lump sum. Take a regular income with 25% tax-free and the rest taxed at your marginal rate.
- Mixing these options. If you’re lucky enough to have a large pension pot, you can mix these options for even greater flexibility.
More on the different ways you can access your pension can be found at pensionwise.gov.uk.
Proper Planning is Paramount
When approaching retirement, you need to be aware of these options and how they can be implemented. Planning is key to make your money work for your life style. Consideration for life events, such as a family wedding or a dream holiday, can help you adequately account for your cash and budget accordingly. Great advice and the tools to make it happen are key to striking the balance.
The new pension reforms have revolutionised how we can make sure we don’t have to compromise later in life. We think that this is how retirement should be, which is why the TPI Pension from True Potential Investments, fully supports the new pension freedoms. Keeping your savings invested or switching into a different investment solution, and taking advantage of the pension freedoms can be a great way to watch a nest egg grow, whilst enjoying the benefits of a flexible retirement income. With our market leading True Potential Portfolios you can be rest assured yours, or your client’s money is well looked after, as it should be.Open a Personal Pension