Since 6 April this year, anyone aged 55 or over could – in theory – empty their money purchase pension funds entirely, although any withdrawals will be treated as income and taxed as such. Nine in ten people (90%) going in to drawdown have taken advantage of the new pension freedoms and have chosen to take a cash lump sum, according to pension provider Zurich. The remainder are opting for an annuity or drawdown.
Successful investing involves making choices that meet your unique needs today and your financial goals for the future. Your personal circumstances will affect your decisions every step of the way. Whether you are saving for a home, retirement or your child’s education, here are six investing principles to consider:
Most home buyers purchase life assurance when they arrange a mortgage, but many overlook another form of financial protection that they are potentially more likely to need prior to retirement.
Limiting the value of payouts from pension schemes
The lifetime allowance is a limit on the value of payouts from your pension schemes – whether lump sums or retirement income – that can be made without triggering an extra tax charge.
Under new rules introduced in April 2015, you can now take the whole of your pension pot as cash in one go if you wish. However, if you do this, you could end up with a large tax bill and run out of money in retirement.
Consider the tax implications and the risk that your money could run out
Under new flexible rules introduced in April 2015, you can now use your pension pot to take out cash as and when you need it. However, there are tax implications and a risk that your money could run out.
With flexi-access drawdown, when you come to take your pension, you reinvest your pot into funds designed to provide you with a regular retirement income. This income may vary depending on the fund’s performance and it isn’t guaranteed for life.
Investment-linked annuities also pay you an income for life, but the amount you get fluctuates depending on how well the underlying investments perform. If the investments do well, they offer the chance of a higher income. But you have to be comfortable with the risk that your income could fall if the investments don’t do as well as expected.
Guaranteeing a regular retirement income for life
A lifetime annuity is a type of retirement income product that you buy with some or all of your pension pot. It guarantees a regular retirement income for life. Lifetime annuity options and features vary – what is suitable for you will depend on your personal circumstances, your life expectancy and your attitude to risk.
Regular retirement income for life or for a set period
An annuity is a type of retirement income product that you buy with some or all of your pension pot. It pays a regular retirement income either for life or for a set period.