Pension holders, aged at least 55, are able to remove funds from their pensions. You are able to withdraw as much or as little as you wish!! There is also no restriction on the frequency of withdrawals.
At retirement, after 55, you can:
- use your pension fund to buy a regular income (an Annuity)
- OR make withdrawals from your pension fund (Drawdowns) on a regular or ad-hoc basis. The withdrawal amount is unlimited but it will be treated as taxable income
For both of these choices you have the ability to take a tax free lump sum of 25% of the value of your fund when commencing your pension
- OR take a lump sum and leave your pension untouched.(Uncrystallised Funds, Pension Lump Sum). For this option, 25% of the Lump sum is tax free with the rest being treated as taxable income
Before retirement you can also access your pension fund if it is a "small pot", i.e. has a value below £10,000
Using Drawdown, the pension fund remains under the control of the Pension holder. You could manage how much of your pension fund you use and therefore how much will be passed on to your heirs. This method, however, does not have the certainty of the regular income provided by an Annuity and is reliant on the pension’s investment returns. A consistently good investment return would result in a growth in the pension fund whilst poor investment returns could mean the pension runs out of money.
If you already use Drawdown before 6 April 2015, you will be able to move to the new rules, but wii be restricted on how much you can pay into your pensions in the future.
The Pension changes open up a number of financial opportunities in a complex area. To fully take advantage of these, we strongly advise that you seek professional advice from a fully qualified and regulated Independent Financial Advisor. To arrange for a no obligations, initial free telephone consultation click here.