In the past, taking an income from your accrued pensions was straightforward. You either had a final salary pension scheme that paid you some tax free cash and an income for life or you had a pension fund built up in some form of money purchase scheme (company or private) from which you took an amount tax free (called a pension commutation lump sum) and used the remaining fund to buy an annuity from an insurance company, which essentially did the same.
Changes in government legislation over the years, and most significantly what are referred to as “pensions freedoms”, have revolutionised the way in which you can both access (generally from age 55) and take benefits from your pension arrangements – in most cases even if you have not actually retired.
That increase in choice brings with it a sharp increase in complexity over the decisions you need to make over what might be your biggest asset other than your home. Proper planning and good quality financial advice are essential to help you make those decisions that are right for you.
At Dawn Slater Wealth Management, we’re experts in pension freedoms. We will help identify your retirement income objectives by completing a financial planning exercise, potentially including cashflow modelling, and assessing your suitability criteria, including your attitude to investment risk.
Once we’ve established your objectives, we’ll review your current pensions and investments to see if there’s a gap between what you already have and what you’re trying to achieve. This will include:
• Investment risk
• Investment performance
• Any additional features
Only when we’ve done this will we make personal recommendations to you. This may include:
• Leaving your pension as it is and taking the money later
• Receiving a guaranteed income (either from a final salary scheme or an annuity)
• Receiving a flexible income (drawdown)
• Tax cash in segments (drawdown)
• Cash in your entire pension. Note: this can give rise to a very high tax charge. You should always seek professional advice
Or a combination of some or all of the above options.