Pension Freedoms Summary, advice available, taxation and Tips

Pension Freedoms Summary

Pension Freedoms Summary

Pension Freedom legislation is now in place and the expected options are now reality. Whilst legislation now permits enhanced flexibility and control many pension providers are struggling to accommodate all options that the legislation permits.

Most pension providers are recommending that advice is sought. The Governments Pension Wise service is only designed to provide guidance and not advice. Our approved panel of advisers are regularly speaking with many of the UK's pension providers and can advise you on your options for all UK personal and occupational pensions.

 Pension Freedom key points:
  • Available for people age 55+
  • Access the whole Defined Contribution and (Personal Pension, Stakeholder etc.) pension fund as a lump sum. Any withdrawals will be subject to income tax at the marginal rate.
  • Access pension benefits in Defined Benefit (Final Salary) pensions. Taxation as above.
  • Option to take partial withdrawals.
  • Option to take flexible level of income without the restriction of GAD limits. 
  • A pension commencement lump sum of 25% of the fund value is still available.
  • No need to ever buy an annuity.
  • Pass on your pension benefits to who ever you want.
  • Improved death benefit options - Death Pre age 75 0% tax, Death Post age 75 tax payable at beneficiaries marginal rate (applies to Personal Pension and Drawdown pensions only).

What to watch out for

  • Important that withdrawals are made via the correct route – Flexi-access drawdown or Uncrystallised Funds Pension Lump Sum (UFPLS).
  • Income tax payable on withdrawals (can this be reduced? - for example using unused personal allowance, spreading withdrawals over several tax years etc).
  • Emergency tax being charged and then having to reclaim from HMRC (Tips on how to avoid this happening).
  • Reduction in the Annual allowance from £40,000 per annum to £10,000 if wrong withdrawal option selected.
  • Unexpected tax penalties.
  • Pension providers not allowing all Pension Freedom options, forcing clients to receive advice, and therefore incurring costs.
  • Exit penalties and other charges.
  • Erosion of pension fund and risk of no/low pension in retirement

The above is designed as guidance only. Advice should be sought from a qualified financial adviser. 

For independent advice without obligation use our enquiry pages and an adviser will contact you within 24 hours. 1 hour of advice is free.