New Pension Changes 2015
The government introduced radical new changes to Pensions which came into effect on the 6th April 2015.
What’s changed? Well as long as you have reached the minimum pension age of 55 you can take what you want, when you want. On the face of it this seems good news but more choice means you have important decisions to make when and how you want to access your pension.
Everyone is in the same situation and many may be concerned that if they make the wrong choices they could end up paying too much tax or even outliving their savings.
To help you plan for the retirement you deserve there are five areas you should consider:
1. Which route will provide you with the income solution for your needs?
Do you want the certainty of a guaranteed income for the rest of your life, such as an Annuity or would you like the flexibility to vary your income each year. Income draw-down allows you to take different amounts of income at different times while the rest of your fund stays invested. On the other hand perhaps you would like a lump sum or perhaps a combination of all three?
2. How is your pension pot used to provide your income in retirement?
An Annuity uses your Pension to guarantee you an income for the rest of your life. Income Draw-down means you can vary your income as and when you need it, with the rest still invested. This mean the rest of your fund is still invested in a tax free environment, but the value of your fund could fall as well as rise.
3. Consider tax implications:
From April 2015 you can access any pension savings you have as a one-off lump sum. You can do this but does it make sense? If you withdraw the remaining amount you are liable to pay tax on that amount which is applicable to you in that tax year.
4. Make sure you have enough money.
The average life expectancy of the average 65 year old today is now 83 for men and over 85 for women. Consequently it can be difficult to assess what you’ll need and how much you can take without running out of money if you take out too much too soon.
5. Your remaining pension fund can now be passed onto your dependents:
If you choose a Lump Sum or Income Draw-down product you are able to pass down your remaining pension pot to future generations on the event of your death.
Understanding the choices will help you make the right choices for you and your family. We’ve highlighted a few of the areas you should consider, but should you wish further advice on how to plan for your retirement contact Scottish Pensions on 0141 340 9780 for a free consultation with an Independent Financial Adviser.
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