The value of pensions and investments and the income they produce can fall as well as rise. You may get back less than you invested.
Tax treatment varies according to individual circumstances and is subject to change.

Your Choice, Your Freedom, Your decision

What does greater freedom mean for you?

Let’s rewind to 19 March 2014. Budget Day. Before George Osborne, the Chancellor of the Exchequer, stood to give his Budget speech, any choice you had on how to spend your pension fund was restricted by tax law. After all, the government gave away generous amounts of tax relief to encourage people to save for a retirement income so they made sure that was exactly what you did with the money. Then George Osborne dropped a bombshell that blew away these restrictions in one hit. He said:

I am announcing today that we will legislate to remove all remaining tax restrictions on how pensioners have access to their pension pots. Pensioners will have complete freedom to draw down as much or as little of their pension pot as they want, anytime they want. No caps. No drawdown limits. Let me be clear. No one will have to buy an annuity.

Choice is good as long as you make the right one

Retirement freedom creates more choice; but it brings with it more risk. We may not have liked the restricted choice we’ve had until now but it did protect us from running out of money.

We now live in an era in which we live longer. We are retired for longer. We need to make our savings last for longer. We can only do this if we make the right choices.

We can only make the right choices with the right advice. In this guide we will take you through the choices that are on offer so that you can approach retirement feeling more informed and with the help and advice you need.

The new retirement freedoms can help you plan and construct your retirement income but only with the right preparation and advice

Getting ready for retirement

You may be retired a long time

In its report Retirement Income Uncovered, Old Mutual Wealth discovered some interesting facts from the people it interviewed. On average men retire at 64.3 and women at 63.1. At these ages men can expect to live until 84.3 and women until 84.7 (Source: Old Mutual Wealth – Retirement Income Uncovered.) Being retired for 20 years or more means you need to plan for an income that funds retirement for this long. Looking at it another way, at 65 you have a one-in-four chance of living to 94, and almost a one-in-ten chance of living to 100.To make your money last this long you need to plan carefully and as early as possible. We will help you prepare so that you avoid the risk of ruin.

Retirement is changing

With the demise of the final salary schemes most people are taking more of a portfolio approach to retirement income. As well as traditional pension savings and the basic state pension, people are using ISAs and other investments such as bonds, to supplement their income.

Also, semi-retirement is becoming more common with people continuing to work part-time in retirement either through necessity or simply because they want to. In fact, people approaching retirement expect part-time work to contribute 27% of future retirement income.

Don′t pay any more tax than you have to

Having spent a long time carefully building your retirement fund the last thing you will want to do is give a big chunk of it to the tax man. This is another reason why you need to plan carefully how you use your retirement fund. Take too much out too quickly and instead of being a basic rate taxpayer, overnight you can become a higher rate taxpayer.

By carefully planning with us you will work out how best to use your tax-free cash entitlement so you maximise your personal allowance.However, if you must draw a large sum from your retirement fund you can at least do so in full knowledge of the tax implications so you do not get a nasty shock.

Planning makes a real difference

Research shows that having a target income and getting the right financial advice can make a marked difference to someone’s retirement income. Retired people without a target have an average yearly retirement income of £18,000. Focus on a target and take advice on how to hit that target and the average income rises to £24,175 (Source: Old Mutual Wealth – Retirement Income Uncovered.)

How does this happen? It’s all about understanding how to use the available products to construct retirement solutions that aim to hit your target. This may mean using annuities, flexi-access drawdown, uncrystallised fund pension lump sum (UFPLS), other investments, or a combination of several products. But the best way to know what products to use and how to use them is with professional financial advice.

And even though you may have already started income drawdown, this doesn’t mean you can no longer invest in a pension plan and enjoy the tax benefits. You can still invest up to £4,000 in a tax year and receive tax relief at your marginal rate of income tax

What happens in the event of your death

If you die before you reach age 75

There are three choices each receiving different tax treatment:

  • Pay the remaining fund as a tax-free lump sum to anyone you choose.

  • Use the remaining fund to create a flexi-access drawdown for any beneficiary. This will pay a tax-free income for the life of the beneficiary.

  • Use the remaining fund to buy an annuity for your spouse or other financial dependant. The payments will form part of the beneficiary’s taxable income.

If you die after you reach age 75

Again there are three choice each receiving different tax treatment:

  • Pay the remaining fund as a lump sum to anyone you choose. The payments will form part of the beneficiary’s taxable income.

  • Use the remaining fun to create a flexi-access drawdown for any beneficiary.  The payments will form part of the beneficiary’s taxable income.

  • Use the remaining fund to buy an annuity for your spouse or other financial dependent. The payments will form part of the beneficiary’s taxable income.

Speak with one of our Pension and Retirement Advisers …
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