What's the best thing to do with your pension?
When it comes to retirement planning talking to a pension advisor will help you navigate the complex nature of pensions, including the rules, fees, benefits, risks, and tax issues, that impact how you can use your pension pot.
Pensions are complicated and deciding what's the best thing to do with your pension is not something you should do without seeking help from pension advisers. There are a variety of financial terms and factors you need to understand and consider. Before you make any decision it's important to know there are six ways that you can access defined contribution pensions
Most pensions will allow you to take 25% of your total cost tax-free
#1. Don't touch it
The first option is to leave your whole pension pot untouched when you retire. Unless you need the money you can leave it invested to continue to accumulate.
#2 Take an Annuity (Guaranteed income)
Pensions can be used to purchase insurance policies that can provide you with a guaranteed income for the rest of your life.
#3. Secure and Adjustable income
Pensions can be invested to provide regular income the decision on how much to take out how long you want the income to last and when you withdraw it is up to you
#4. Take a lump sum
Pensions can be withdrawn in their entirety taking 25% tax-free and the rest of the taxable lump sum
#5 Take a mixed approach
So you can talk to a pension advisor about mixing all the different options listed above however this is only advisable with larger pensions
#6 Take out cash as you need it
You can withdraw lump cash from your 25% as you need it. The same can be done from the taxable portion of your pension
Reasons people seek pensions advice
As you mentioned earlier discussing retirement planning with a pension advisor will help you best decide how to manage your pensions. They will talk to you about
• Your lifestyle
• Life expectancy and overall health
• Your family and partners needs
• Future care needs
• Additional sources of income
• Another factor that needs to be considered
It's important that you consider all your options carefully and work with a regulated pension advisor before making any major decision.
Factors to consider before making a cash withdrawal
Many people decide to completely close their pension pots and take their whole pensions as a cash lump sum. Others choose to view their pension pots as a bank balance and make withdrawals as they need them
• It's important to understand some things before you decide to either take a lump sum or take the cash withdrawal
• Talk to your pension advisor and to ensure your pension providers will handle a cash withdrawal
• they will highlight any charges or fees that may be attached to every withdrawal
• When seeking pension advice they all so discuss any tax ramifications and how each withdrawal may push you into a higher tax bracket
• Some pensions place a maximum limit on cash withdrawals and on the number of cash withdrawals you can make
Things you should know about Annuities(Guaranteed income)
Another common way to deal with pensions is to arrange to receive an annuity. This effectively converts your pension pot into an annual pension providing you with a lifetime guaranteed income or a guaranteed income paid out over a specific period
• Every pension provider is legally obliged to provide you with the option of purchasing an annuity. At this point it's advisable to work with a retirement planning expert I think I can help you to shop around and get more constant effective quotations ensuring you get the best annuity deals on the market
• Once an annuity is purchased, and you have decided on the level of income you want to receive switching to another provider or plan is not possible
• Some of these products are very inflexible and the option of increasing your income in the future especially if your cost of living increases may be difficult
• most annuity providers will ask for a minimum contribution before they will send you their product
• I knew what I need to wait can increase or decrease based on specific economic circumstances.
As you can see pension planning is complicated, by talking to a pension advisor you are taking the right stop by ensuring you make the best decisions about your pensions.
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