Present for the future
PUBLISHED: 05:33 05 January 2015
Big decisions taken now can have long-lasting consequences in later life, so it's always worth giving careful consideration to the available options - taking retirement benefits is no different.
We all know the festive period is about enjoying the moment, but for many it’s also a time to reflect, look ahead and make plans for the future. Big decisions taken now can have long-lasting consequences in later life, so it’s always worth giving careful consideration to the available options – taking retirement benefits is no different.
If you are in a final salary (defined benefit) scheme then you may have the comfort of knowing exactly what retirement income you will receive. However, if you have built up a pot of money in a personal pension then how you use that money to buy a retirement income is less certain.
How do you take the right retirement benefit to suit you and your dependants? And, how do you ensure you benefit more than the taxman?
You need to consider your own, and maybe your spouse’s, age, health and lifestyle. You may wish to consider whether it is better to take just pension income, or a tax-free lump sum with a reduced income. Do you want a guaranteed amount of income for the rest of your life, or are you prepared for the pension fund to remain actively invested and draw an income from that fund? What are the benefits of taking a level income, or is it better to have an income that starts lower but increases each year?
Confused? If you take the easy way out and just purchase an annuity (a secure fixed income) from your existing pension provider then you could be losing money every year for the rest of your life.
Pension annuities assume an average life expectancy. If you have suffered from ill-health then maybe you could obtain an increased income. Speaking to an independent financial adviser should enable you to get a clearer picture of your options and what suits you best.
In 2015 the government is proposing to make your retirement choices even more flexible, with greater access to the pension pot cash.
If you have several small pension schemes then maybe you can take these as cash in hand.
Normally only a quarter of the pension pot may be taken as a tax-free lump sum. The rest of the pension pot will be added to your income and be subject to income tax. Is cash in hand now a good or a bad thing? This could push your income for one year into a higher income tax charge, meaning you lose, while the taxman wins. Then, who provides your future retirement income?
For a free initial, no obligation meeting to discuss this and any other matters, contact Lovewell Blake Financial Planning Limited on 01603 619620.
Disclaimer: Please note that this article is provided for your information only. While every effort has been made to ensure its accuracy, information herein may not be comprehensive and you should not act upon it without seeking professional advice.