The new flexibility, that certain pension pot holders can avail themselves from 6 April 2015, offers more opportunity regarding the funds they have saved. Once you reach minimum pension age, normally 55, you will be able to:
- leave your pension fund invested, no change;
- enter drawdown, thereby taking some of your money whilst leaving the rest where it is;
- withdraw cash in one or a number of lump sums;
- purchase an annuity;
- go with a combination of all of the above;
- or take your entire pension pot in one go.
Additionally, from April 2016, people who already have an annuity will be able to effectively sell it on, so that they too can benefit from the pension freedoms announced at last year’s Budget.
Currently, people who have bought an annuity are unable to sell it without having to pay at least 55% tax on the proceeds of the sale. From April 2016, the tax rules will change so that people who already have income from an annuity can sell that when they choose and will pay their usual rate of tax they pay on income, instead of 55%.
With so many options to choose from, and a variety of tax traps to avoid, there has never been a more compelling time to seek professional advice BEFORE you make any decisions.