Pensions Freedom – so what did people do with their new-found freedom?
Over 230,000 people accessed over £4.3 billion in pensions saving through 516,000 payments, under new pension freedoms introduced a year ago, according to Her Majesty’s Revenue & Customs (HMRC).
Pensions Freedom – will there be further changes?
The government is taking action to ensure the new freedoms work for consumers and that they have the right information to make informed decisions: with capping of early exit fees, allowing earlier access to Pension Wise guidance, and working with the pension industry to introduce a Pensions Dashboard. It is planned that more people will have the right to sell their annuities from April 2017.
Pensions Freedom – are there tax implications?
If you have a modest pension post of £20,000 you might consider taking your pension pot as a cash lump sum to repay debt, pay off a mortgage or to spend on home maintenance. However it’s worth noting that if you take your pension pot as a cash lump sum, 75% of the pot would be added to your income for that year which may mean you could pay up to 45% of this portion as tax.
Taking all of the money in your pension pots as soon as you’re able to do so at age 55, isn’t generally a good idea. Even small amounts can grow quite quickly if you keep investing. And if you take your money early you may have nothing left at retirement other than your state pension.
If you would like advice on the tax implications of drawing down your pension please contact Richard Cullen on 0161 975 6700 or email email@example.com.