Pension Choices

Nov 7, 2016 | Tony Byrne's View

coins-plantWhen it comes to pensions there is one age that really matters and that is age 55. Why? Because when you reach age 55 you can actually start taking money out of your pensions.

I say ‘pensions’ rather than ‘pension’ because most people have more than one and I’m not talking about the government state pension. You will have to wait a little longer for that!

If you’re below age 55 then you have time on your side to make a real difference to your retirement. When was the last time you checked your pensions? Do you even know how much they are worth? If the answer is no, then the first thing to do is contact each pension provider and request an up to date valuation statement. Then you need to decide whether it is worth consolidating them into one pot to make it easier to manage. The best way to increase the size of your pension fund is to pay cheaper charges and get better returns. This will take time, inclination and skill.

If you are over 55 you may still want to do the same thing but you have the added bonus of being able to draw money out if you want to and the pension allows it. Normal rules allow you to take up to 25% of your pensions as a tax free lump sum. You can either purchase a guaranteed income for life with the rest or drawdown from the pot as and when you want to. If you are still working, then this may not be the best idea as you will pay tax on the ‘income’ you take from your pension and of course the earlier you take money out the quicker the pot runs out!

Whatever you decide, be careful. The government has made pensions quite complex, there are rules on lifetime allowance, annual allowance, taxation, death benefits. The key is to know all the facts before you make your choice. As Warren Buffet, the world’s most famous investor once said, “risk comes from not knowing what you’re doing.”

Stock market linked investments and any income from them, can fall as well as rise and is not guaranteed. Any figures quoted are for illustrative purposes and should not be taken as a forecast or guarantee. Past performance should not be seen as an indication of future returns and clients may get back less than they have invested.

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