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If you are aged 55 or over and want to access just the Tax Free element of your pension investment and leave the rest until you are ready to retire or to start drawing income you can normally take up to 25% of the value of your investment as a one off tax free lump sum payment.
The method used to access the tax-free lump sum is known as a pension drawdown and will fall into one of two categories.
Where the return from your pension investment is set at the outset and you know exactly how much you will receive over a pre-determined period. These products permit you to access your Tax-Free Lump Sum which is normally up to 25% of the total pension investment and leave the remainder for a set period (usually a minimum of 3 years) with the certainty of knowing exactly what the value of the investment will be at the end of the selected term.
These types of arrangements are suitable for people who want the certainty of knowing exactly what their pension investment will return regardless of stock market conditions or life expectancy and suit the more cautious investor.
Where the return from your investment is not guaranteed and there is a degree of investment risk. These products also permit you to access your Tax-Free Lump Sum and leave the remainder for a period but with no certainty as to what return will be achieved.
These types of arrangements are suitable for people who prefer to apply a degree of risk to their investment. Because of the inherently complex nature of risk and reward and the danger that pension money can be lost we recommend that formal Independent Financial Advice be taken by anyone wishing to invest in a Non-Guaranteed Drawdown arrangement.
Taking pension benefits early will reduce what money is available to you at retirement and you should only take the tax-free lump sum early if you are sure that you will still have enough money to live on at retirement. If you are in any doubt as to whether taking this money early is the right thing to do, we will recommend that formal Independent Financial Advice be taken.
Most pension investments allow up to 25% to be taken as a Tax Free Lump Sum. Anything drawn over this amount will be subject to income tax at your highest marginal rate. Tax will usually be paid under an emergency tax code with any overpaid tax repaid in the following tax year or earlier if you put a claim into HMRC.
Click here to calculate the amount that will initially be deducted.
Also known as a ‘Money Purchase’ pension this is a pension where the benefits are not defined and the value of the pension investment will depend entirely on how much money has been paid in and what return on the investment has been achieved.
Often referred to as a ‘Final Salary’ pension which is where the benefits that the pension will provide at retirement are defined and not dependent on how much money has been paid in. These types of pensions do not have a published investment value though it is usually possible to obtain what is known as a Cash Equivalent Transfer Value (CETV) where the scheme administrators will calculate how much they are prepared to let you have if you forgo the defined benefits built up whilst you were a scheme member.
Tax will most likely have been deducted under PAYE rules using an emergency tax code. You can either wait until HMRC reconcile your tax affairs in the next tax year or claim for early repayment of any overpaid tax by using form P53 or P53Z. These forms are available from www.gov.uk.
You cannot normally access the money in your pension before age 55.
Our business model involves us asking you a series of questions designed to enable us to gather sufficient information and understanding of your requirements that we can present you with information on all of the options available to you. We aim to do this in such a way that you are fully empowered and confident enough to make an informed decision as to the best outcome for your personal circumstances. If at any time during the process it becomes evident that you require and/or need formal recommendations for a particular course of action and we will refer you to an independent financial adviser.
Enhanced annuities work in the same way as a standard pension annuity but also consider your lifestyle and health conditions. If you qualify for an enhanced annuity you would expect it to provide more income for the rest of your life than a standard pension annuity would provide.
A lifetime pension annuity is designed to provide you with an income and is payable for the rest of your life as a minimum. The funds that you have saved into your pension pot are used to purchase an annuity either from your existing pension company or from a new pension income provider.
A Fixed Term Annuity is a type of Guaranteed Drawdown product designed to allow you to access your pension in a more flexible manner than purchasing a set income for the remainder of your life which is what a lifetime pension annuity does. They provide a guaranteed return on your investment.
Flexible Access Drawdown products provide a flexible way to take your pension and range from relatively low risk products with guaranteed returns to high-risk products investing in all manner of asset classes. Whilst providing flexibility they do not give a guaranteed income for the whole of life.
When you are 55 or over you can access your pension and, if you wish, take a tax-free lump sum. You can then invest the remainder in a pension product and either take an income or keep it invested. You can normally take up to 25% of your investment tax free and use this money as you wish.
If your pension has not been crystalised (accessed previously) you can take a tax-free lump sum from the pension investment. This is normally in the form of a 25% tax free lump sum payment, but some types of pension schemes do have enhanced benefits and permit more than 25% to be taken.
The Basic State Pension is available to men born before 6th April 1951 and women born before 6th April 1953 and the New State Pension available to those born later. We have links to the Government information pages and the State Pension Age Calculator and a link to obtain your State Pension Forecast.
Is a way of taking some of the equity (investment wealth) built up in your property as tax-free cash to provide additional income in retirement or to pass over inheritance money to the family before dying, repay other mortgages or borrowing or to just spend on something you have always wanted.
With our office in Ilminster we can provide face to face meetings for people in the Somerset area including Taunton and Yeovil. We are may also be able to arrange face to face meetings in the areas of Bridgwater, Glastonbury, Shepton Mallet and Wells areas.
We are happy to have video meetings with people and therefore can provide a visual meeting to anyone in the UK. We are happy to talk through your options over the phone regardless of your location, so we can discuss your needs. We also are very happy to communicate with you through email which many customers now prefer, we can therefore provide a full UK coverage.
