CFM

Retirement Options

At retirement or from age 55 you can take the benefits from most personal arrangements. You can take up to 25% as a tax-free lump sum, the remainder of the fund can be withdrawn over time, this will be taxed as income.

Your Tax-Free Lump Sum
We have access to a range of savings plans available to help you invest your lump sum in a tax efficient way to potentially provide you with capital growth or additional income. If you withdraw 25% of your pension fund, the income that you are able to secure is likely to be significantly lower. From April 2015, those aged at least 55 have freedom over how they take an income from their pension, over and above any tax-free cash.

We will review your individual needs and circumstances to see if this could be an option for you. It is not always tax advantageous to re-invest your 25% tax free lump sum and it may not be the right option for you.

The choices on retirement are to:

• Take the whole fund as cash in one go.

• Take smaller lump sums, as and when needed.

• Take a regular income.

The latter could be via income drawdown, where you draw directly from the pension fund which remains invested, or via an annuity, where you receive a secure income for life.

Any withdrawals in excess of the tax-free amount will be taxed as income at your marginal rate. So, if you are a basic-rate (20%) taxpayer, any income you draw from your pension will be added to any other income you receive (e.g. your salary). This could push you into the higher (40%) or even top-rate (45%) income tax bracket.

Choosing to take the pension out in stages, rather than in one go, could help you manage your tax liability. It should also be possible to take the tax-free cash straightaway and the taxable income via income drawdown at a later date.

Pension contributions are subject to a £60,000 annual allowance and specific contribution rules. This will continue to be the case.

However, if you make any withdrawals from your pension (above your 25% tax free lump sum), then your future contributions may be restricted to £10,000 each tax year, if you still wish to receive tax relief on those contributions. An adviser will be able to discuss these options with you based on your individual needs and circumstances.

Income Drawdown carries significant investment risk as your future retirement income remains totally dependent on your pension fund performance. Pension Drawdown may only suit a limited number of people.

Retirement ages to Increase
The age at which you can draw your pension is currently 55. This is set to increase to 57 from 2028 and from then will increase in line with the rise in the state pension.

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.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

Figures and percentages quoted throughout this page correct as of 15/06/2023.

Please read our Privacy & Cookie Policy

The information on this website is for use of residents of the United Kingdom only.
No representations are made as to whether the information is applicable or available in any other country which may have access to it. Creative Financial Management Limited is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited which is authorised and Regulated by the Financial Conduct Authority.

Approved by The Openwork Partnership on 15/06/2023

CREATIVE FINANCIAL MANAGEMENT LIMITED
Registration number 13734208

Registered address
Unit 4, Suite 8, Regent Business Hub,
Pavillion Business Park, Leeds.
West Yorkshire, United Kingdom, LS12 6AJ

Creative Financial Management

Copyright © 2023
All Rights Reserved