Getting ready for retirement
Whether you’re planning to give up work completely or go part time, there are several options to choose from to help make sure you achieve your retirement goals. An adviser from The Openwork Partnership will work with you to explore how to make the most of your personal allowance as an individual or couple to maximise your retirement income.
Understanding your options
You might choose to retire gradually or carry on working for longer, perhaps going part-time before you stop completely. If you retire before your state pension kicks in and choose to work part-time, an adviser from The Openwork Partnership can determine the best way to access your pension and any other savings so you’re not paying more tax than you need to.
Accessing your pension
There are many ways to access your money in retirement, so you’ll need to check whether your existing plan can meet your needs. In April 2015, the government introduced Pension Freedoms, which give you greater freedom and flexibility.
In simple terms, currently anyone aged 55 and over can access their defined contribution (DC) pension savings. There are four main ways for you can do this.
Buy an annuity
You can convert your pension pot into a guaranteed taxable income usually for the rest of your life by buying an annuity. There are different options for the amount of income you receive, and this can include death benefits – so you can pass your some of the value of your annuity to your beneficiaries.
Your pension pot remains invested, but you can withdraw funds as needed or take a regular income. You can normally take up to 25% of the pension pot as a single lump sum tax free or you could take smaller amounts, with the first 25% of these each being tax free. You can also opt to receive a regular income from your pension fund, taxed at your marginal rate of income tax. With flexi-access drawdown you don't have a guaranteed income for life and how long your funds last in retirement will depend on investment performance, how quickly you run down the funds and naturally, how long you live.
Take it all out as cash
You can cash in all your pension savings. You’ll normally be able to get 25% tax free and pay income tax at your marginal rate on the rest, but this could cause a large tax bill and leaves you with the need to manage your money carefully to not run out in retirement.
Take part of it out as cash
You can cash in part of your pension savings, normally with 25% of any amount tax free and the rest taxed at your marginal income tax rate. You can do this as many times as you want until your pension runs out.
The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.