Julie Hutchison from Standard Life and regular blogger at moneyplusblog, shares an update on the new flexibility coming your way soon:
- From April, you’ll be able to access money in some types of modern pensions from the age of 55. Just like other savings, you’ll be able to withdraw as much as you want, when you want. But while some of your pension savings may be withdrawn tax free (usually 25% of the total), the rest could be taxed like other income if you’re not careful. So make sure you don’t get hit with a tax bill that could be avoided and remember that you need money to last the whole of your retirement.
- In the future, you will be able to take money out of your pension while still saving in to it, from age 55 – you won’t need to retire to start accessing your pension. So, you might decide to take some or all of your tax-free cash sum to pay off the mortgage or cover university fees, while continuing to work and saving for your future.
- When it comes to how you provide an income from your pension savings, you will have more choice. You will be able to use your savings to buy a an annuity, which guarantees to pay you an agreed income for life. Or you could keep your money invested and take a flexible income (drawdown) as and when you need it.
- The tax you pay on any pension savings you have when you die – called “pensions death tax” - is changing, so more of your savings could help your loved ones in the future. The old 55% death tax charge is being scrapped and in some cases that now means that your pension savings could even be tax-free for your loved ones after you're gone.
- The Government is introducing a “Guidance Guarantee” to help people who are retiring. The Pensions Advisory Service will offer a phoneline to help people and the Citizen’s Advice Bureau will provide face to face support too. People can also get information and help from their providers and may want to consider paying for advice.
Read our guide to why you might be better off stashing savings in a current account, plus tips on dealing with debts.