In retirement your income from employment or self-employment may be replaced by an income from your pensions.
One way of doing this is to use your pension fund to purchase an annuity from a suitable annuity provider, providing you a secure income for life, no matter how long you live.
Alternatively, flexi-access drawdown allows you to take an income directly from your retirement fund rather than buying an annuity, but due to the risks involved you will need to take specialist advice.*
Far-reaching pension reforms, known as the 'Pension freedom reforms', were implemented in April 2015, which changed retirement planning significantly:
- Individuals now have full access to defined contribution (DC) pensions from age 55, with unrestricted income available, subject to paying their marginal rate of Income Tax on any taxable withdrawals. It is still be possible to take up to 25% of the pension fund as tax free cash.
- A DC pension can now be passed to anyone after death, not just a dependant. Income taken from the DC pension by beneficiaries will be tax free if death is before the age of 75, and at the beneficiary’s marginal rate if death is later than this.
These changes are good news for pensions in that they remove most of the concerns many people have about their inflexibility. More flexibility means that taking advice, to help protect your retirement savings from being exhausted and meeting your needs for life, will be more important than ever before. The right type of advice can make a huge difference and it is important that you make the appropriate choices for your specific circumstances.
Please contact us if you wish to discuss your personal situation.
*The level of income from pension drawdown is not guaranteed. There is a very real chance that you may need to reduce your drawdown income in the future, in particular if the performance of your investments is lower than expected, or you live to a greater age than originally anticipated when choosing your initial income level.
The value of an investment with St. James's Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances.