Our advisers can help you make the right decisions

Bev Stoves & Sarah McCarthy, Independent Financial Advisers, Investment Sense

Contact us on:

0115 933 8433

info@investmentsense.co.uk

Pension Freedoms give you unprecedented access to your pension, with more options than ever to meet your needs for a lump sum and / or income. You are therefore bound to recognise some of the options for taking money out of your pension, others are new.

This guide considers the different options in some detail, to ensure you understand the advantages and disadvantages of each option. However, it may transpire, that due to your personal circumstances or the size of your pension fund, some of the options are not available or suitable.

In summary, the following options are available to you:

  • Taking the entire pension pot as one single lump sum
  • Taking the 25% tax-free lump sum and generating an income from one of the following methods:

o Lifetime Annuity, including an Enhanced Annuity

o Investment Linked Annuity

o Fixed Term Annuity

o Flexi-Access Drawdown

o A combination of the above options

  • Taking ad hoc lump sums from your existing pension, also known as Uncrystallised Funds Pension Lump Sum (UFPLS)
  • Delaying a decision and leaving the money invested in the existing pension

Except for delaying and UFPLS, each of the above options results in your pension becoming ‘crystallised’. This simply means you have chosen to take some or all your benefits from your pension.

When a Benefit Crystallisation Event (BCE) occurs, the value of the fund used to provide the benefits is measured against the Lifetime Allowance, currently £1,030,000.

If the value of your pensions is more than the Lifetime Allowance, a tax charge may become payable if you have not previously applied for protection against the tax charge. It is therefore important to consider all your pensions and existing pension income when retirement planning.

The rest of this guide concentrates on explaining more about the options available to you, including the advantages and disadvantages of each.


Where next?

Delay taking your pension

Annuity

Investment Linked Annuity

Fixed Term Annuity

Flexi-Access Drawdown

Uncrystallised Funds Pension Lump Sum (UFPLS)

Full Encashment

Purchased Life Annuities

8 Steps to take leading up to retirement