A CASH LUMP SUM!

Under the new rules you can, in principle, take all of your pension fund out as cash. The downside to this option is that only 25% of what you take would be free of tax and so you could end up paying up to 45% tax on some or all of the rest that you take out as cash. If you are tempted to take large amounts out as cash, do get someone to help you crunch the numbers as to how much tax you will have to pay. Having saved the money carefully in the pension over all those years, it does not make sense to waste it now. And if you splurge now on the Ferrari, it could mean you would have little left for your future needs. So this Pension Freedom does not provide freedom from taxation, but it does allow a great deal of flexibility for managing how you take it out!

FREEDOM TO TAKE YOUR PENSION BENEFIT IN A VARIETY OF WAYS !

In the past you had very little choice in how you could use your pension savings. You were allowed to take 25% of the pension fund as tax-free cash, but the rest had to be used to purchase an annuity so as to secure an income for life. You would buy an income for life with your pension funds. The older you were, the more income you would be able to buy with your pension fund. (Do make sure you understand what an annuity is as it still can be a useful pension option. We would be happy to help explain what it is.)

AGE FREEDOM!

Previously pensions generally had a minimum age of 60 or 65 for taking the benefits. The current pension regulations allow individuals to take any or all of their pension benefits from age 55. There are some exceptions so it is worth checking with your pension provider. Do remember that you do not have to retire in order to be able to access your pension benefits. For those who are in their 40s or younger, we also need to sound a warning that this minimum pension age of 55 is likely to increase in the future as the State Pension Age increases.