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.

Navigating your choices

From 6th April 2015 the way you use your retirement savings changed

These changes can have implications if you get it wrong. For example, you may create a large tax bill that you wouldn’t otherwise have had. Also, not all your pension plans may allow this new freedom of choice. You may have to move the money to an environment that does allow it. This might be a good thing to do; it might just as easily be a bad thing. You can avoid getting it wrong with the right advice.

Taking a tax-free lump sum

You can take 25% of your pension fund as a lump sum, completely tax free. This hasn’t changed and has been this way for many years.

Creating a retirement income

There are two ways you can use your pension to do this:

  • Buy an annuity

  • Invest in flexi-access drawdown

Annuity

What is an annuity & how does it help?

An annuity will pay you an income until you die. Guaranteed. This is the annuity’s big advantage and makes it the starting point for all your retirement planning. We believe it’s essential for you to receive a regular income to cover your day-to-day expenses. However, guarantees come at a cost. The amount of income an annuity pays you depends on two things: the size of your pension fund and how long you might live based on how old you are now. So the older you are the more income you will receive. Your annuity payments form part of your total taxable income and incur income tax.

Each option you add makes the annuity more expensive and reduces the income it pays you. Breslin Financial services will be able to help you make the right choice for your circumstances.

Shopping around - The Open Market option

You do not have to accept the annuity your pension provider offers you. If you do one thing and one thing only, make sure you shop around for the best annuity you can get. This may sound like obvious advice but around 60% of retired people do not. (Source: Financial Conduct Authority – 2014 thematic review.)

Shopping around for the best annuity can make an enormous difference to your retirement income.

You can also choose what type of annuity you have

  • One that pays you a guaranteed income until you die and then stops.

  • One that pays you a guaranteed income until you die and then continues to your surviving spouse or dependent.

  • One that stops paying as soon as you die or one that guarantees to pay out for a minimum time, for example five years, even if you die earlier.

  • One where the income stays the same.

  • One where the income increases each year.

Flexible Access Drawdown

Flexible access drawdown just got better

Income drawdown has been around for a while but there were restrictions wrapped around it. The new retirement freedom removes these restrictions and creates the new flexi-access drawdown.  You can think of flexi-access drawdown as a bit like a bank account. You keep control of your pension fund, investing it and drawing down income as you need it, when you need it. You have complete flexibility over how much you take out and how often you take it. Once you have drawn your 25% tax-free cash entitlement any further withdrawals form part of your total taxable income and incur income tax.

The complete flexibility that flexi-access drawdown gives you is its big advantage. On the downside it brings two big risk.

  • You don’t make the investment returns you need to support your withdrawals

  • You withdraw too much too quickly and run out of money. We call this the ‘risk of ruin’.

Speak with one of our Independent Pension Advisers …
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