What is pension freedoms?

Pension freedoms is a piece of legislation introduced by the government in 2015. It allows you to access your pension in more ways than previously possible from the age of 55.

From the age of 55, you can:

  • Release the first 25% of your pension tax-free

  • Set up a regular income

  • Withdraw lump sums as and when you want

  • Buy an annuity

  • Change how your savings are invested

  • Choose one or more beneficiaries to receive any remaining funds when you die

What happened before pension freedoms was introduced?

Before the introduction of pension freedoms, people looking to retire early only had the option to buy an annuity which gave them a regular guaranteed income. Now, you have greater flexibility when it comes to accessing your savings and can do so in a way that works best for you.

What types of pensions are eligible for pension freedoms?

  • Personal and private pensions

  • Company pensions

  • The State Pension

  • Unfunded pensions

Things to be aware of when accessing your pension

The great flexibility offered with pension freedoms is welcomed by many. But with this flexibility comes a number of challenges. So, when accessing your pension, it’s important to be aware that:

  • You could run out of retirement savings if you take too much too soon

  • You could end up with a large tax bill

  • Your pension investments need regular management

  • If you have a final salary pension, you could lose out on valuable benefits by accessing it

This is why so many people are turning to financial advisers to help them with their pension. As regulated financial advisers, we can help you access your pension in the best way while avoiding these challenges.

What if I have a final salary pension?

Final salary pensions come with a number of valuable benefits, such as a guaranteed income for life from a set age. Due to the way this type of pension works, you are not able to release your money in the same way you could a defined contribution pension.

To take advantage of pension freedoms with a final salary pension, you would first need to transfer your funds to a new, modern pension scheme. Doing so does mean giving up your guaranteed benefits, which for most people is not the best thing to do. That’s why you should speak with a financial adviser before making any decisions. And if your pension is worth £30,000 or more, then by law you have to take this route. 

Important note: releasing money from your pension early isn’t right for everyone as it can leave you with less to live on later in life. That’s why it’s a good idea to speak with a financial adviser first.

Thinking about your pension options?

Regulated and authorised by the FCA, we can help you to make the best possible decisions when it comes to your pensions.

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The details provided in this article are for general information only and are in no way deemed to be financial advice. All of the material is correct as of the publication date, but could be out-of-date by the time you read the article.