Pension freedoms – are you taking full advantage?

pension freedoms - what you need to know


MoneyPlus Features Team

12th June 2015 at 9:54am

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Pension freedoms

Since the pension freedoms landed on April 6, many savers – more than anyone anticipated – have chosen to take advantage of the new flexibilities and access their pension savings.

This could be by taking some or all of their tax-free lump sum, a regular income (known as drawdown), buying an income for life (an annuity) or even taking all their pension money in one go.

If you’re near or over 55 and thinking about taking some or all of your pension money, here’s what you need to know to make the pensions freedoms work for you.

Make sure you don’t lose out

In the run up to accessing your pension, think about how you plan to manage your money in retirement.

You’ll also need to make sure your pension provider is able to give you the flexibility you need. If this isn’t the case, don’t worry, there are things you can do.

Don’t all providers offer pension flexibility?

Believe it or not, pension companies are under no legal obligation to offer all the freedoms. Many even warned before April 6 that they might not be able to offer the fully-flexible access savers, and the government, expected.

Ask your pension company these questions

These are just some of the things you should be checking:

  • What options do I have with my money?

The full list of options should include buying an annuity, taking a regular income, or withdrawing cash whenever you want to. You could even leave your money where it is if you don’t need it right away to potentially benefit from more growth and make your money last longer.

  • What withdrawal access do you offer?

If you’re taking an income, make sure you can get the flexibility you want.

  • Will you help me understand what all my options are?
  • Can you pay me regularly, can I take lump sums when I need them; how about both?
  • Are there any limits?
  • Will you help me understand how much tax I’ll need to pay?
  • Can you help me take my money in the most tax-efficient way?
  • What are the timescales to access my money?

You don’t want to find out that you have months to wait.

  • What are the charges for accessing my money?

Make sure your provider explains these so that you know exactly what you’re going to be charged each time you make a withdrawal.

Don’t get stuck – shop around for what you need

If your provider isn’t offering enough flexibility you should consider transferring your pension to one who does. Explore your options carefully because transferring a pension isn’t right for everyone and you could give up valuable benefits or guarantees and you could lose money. If you’re unsure, you can find out more from the Government’s free Pension Wise service.

Last, but certainly not least, take the time to learn about the changes to pensions and how you can benefit. There are online guides and calculators available to help you understand your options.

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The information in this blog or any response to comments should not be regarded as financial advice. A personal pension is an investment. Its value can go up or down and may be worth less than you paid in. Laws and tax rules may change in the future. The information here is based on our understanding in June 2015.