Why it makes sense to take advice
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We’ve written quite a few blogs about pension freedoms and the changes this has made to the finances of people post 55 years old. It has undoubtedly brought benefits and given people choice – but the options pension freedoms offer are wide and everyone is in a different financial situation.
The key then to making the right choices for you and your family’s finances is to talk to a financial adviser.
It’s five years now since the then Chancellor, George Osborne, unveiled pension freedoms – allowing consumers to make flexible withdrawals from their pensions; described at the time as the ‘most radical change’ to private pensions for many years. This meant that anyone aged 55 or over could take the whole amount from their personal pension as a lump sum, generally paying no tax on the first 25% and the rest taxed at their marginal income tax rate.
While the temptation of taking some tax-free cash from your pension at 55 is huge, once you’ve taken it out, that’s it. You can’t put it back in there… If you have some solid plans about what you’re going to do with it, which make financial sense – such as upgrading your kitchen - then that could make sense. But, taking some out and ‘hanging onto it’, for instance, means it would then be in your estate for inheritance tax.
The choices are wide and the tax implications of any decisions are myriad and you would need the help of a financial adviser to guide your through all the options and read all the important small print. The financial situation of your partner, for instance, could also affect your choices. If your other half is a non-earner, then you can potentially claim part of their Personal Allowance.
While the temptation to take some tax free cash at age 55 is a strong one, we are certainly not suggesting that you don’t do this. Very often it can be a chance to do that home improvement you’ve been wanting to do for ages. But, it’s a case of getting the right advice and making sure that the decisions you make support you living the life you have set your heart on post-retirement and not running out of funds.
The Goodman Partnership – your retirement adviser in Tunbridge Wells – can guide you on the best options for your situation. Call us on 01892 500600 or click here.