26th March 2014 at 1:51pm
The 2014 Budget announced new flexibility for people with smaller pension pots.
In response to the many comments on my Budget Day blog, we’ve created this handy Budget Pension Changes infographic to help explain the two ways you can take your whole pot as cash. These apply from 27 March 2014 if you’ve reached the age of 60. But don’t forget, only 25% is tax free, with the rest added onto your income and liable to income tax.
If you qualify, you might be tempted to cash in your pension. That’s understandable, particularly if debts are a concern – recent estimates show that nearly a third of homeowners will still be paying their mortgage off after the age of 61.
But if you’re really keen to get your hands on the cash because – well, it just feels good to have cash – you need to think carefully about the risks and your longer term needs. After all, since we’re living longer, it might need to last for a couple of decades.
Preserving your savings
Cash is not always king, if you’re keeping it for the long term. This online calculator shows how inflation can wipe value off cash savings, with £30,000 being devalued to just over £24,512 after 10 years, assuming you spend the interest and the inflation rate is 2%.
That’s why many people opt for investing in the stock market, when it comes to longer term savings. It gives you access to better potential growth.
To get help to weigh up the pros and cons, I’d recommend you speak to an expert to get guidance on your own personal situation.
Share your comments or queries regarding the budget pension changes below.
You can now subscribe to regular MoneyPlus blog updates too by simply entering your email address in the subscription bar at the top right-hand corner of the site.
The information in this blog or any response to comments should not be regarded as financial advice.
A personal pension and some ISAs are investments. Their value can go up or down and may be worth less than you paid in.