We’ve just updated our pension benefits option guide. The guide outlines the different options available when you want to access your pension benefits. You have the option to access part, or all, of your pension benefits at any time from age 55 (or your State Pension Age, less 10 years, if this is later, subject to future legislation). This is irrespective of whether you have actually stopped working.
New pension rules introduced in April 2015 changed the way in which pension benefits can be taken. These changes give you a number of options as to how you take benefits and it is really important that the implications of these options are fully understood and accepted before you make any decisions.
The options for most people from age 55 include taking up to 25% of their pension fund as a tax free lump sum and with the residual fund, elect to draw a taxable income via either one of or a combination of the following options:
- annuity purchase;
- flexi-access drawdown;
- uncrystallised funds pension lump sum;
- phased retirement; and
- a combination of the above.
Since April 2015, upon reaching 55 years of age you are able to withdraw any amount from your accrued defined contribution pension arrangements. Apart from the tax free cash element of the pension fund (usually 25%), funds withdrawn will be added to your taxable income in the year it is received and taxed accordingly depending on which income tax bands the income falls within.
This tax rate could be 20%, 40% or 45% or a combination of these rates depending on the amount withdrawn, together with your other taxable income received in the tax year of making the income withdrawal.
The Government will not prescribe a particular product which you will need to purchase or invest in to access your pension savings. It will be up to you to decide how you want to access your pension benefits. Options include a one-off lump sum, a series of lump sums/ regular payments or to secure a guaranteed income.