Individual Pensions

Guide to understanding the new pension rules

Thanks to the new pension freedom rules, which were introduced in April 2015, people are now able to access their pension savings from the age of 55. Not only does this give individuals greater flexibility and control over how they invest their money but it also comes with additional tax benefits.

Someone with a personal pension, or other defined contribution pension pot, has a wide range of options regarding how they use the money to ensure they have a comfortable retirement. It is possible to purchase an annuity, withdraw the whole pension pot or take part of it. The first 25 per cent of a pension fund can be withdrawn without being subjected to tax, while anything above that amount is then taxed at the individual’s marginal (highest) rate of tax.

People with a defined contribution pension who die before the age of 75 can pass on unused pensions without the beneficiary being required to pay tax. For deaths after 75, withdrawals are taxed at the beneficiary’s marginal rate. In both cases, the fund is free of inheritance tax and can be passed down the generations on the same basis.

Pension and retirement planning needs to take these issues into account, and there is a wide choice of pension schemes available.

Personal Pensions

Self-employed individuals or employees who wish to secure a better financial future – if their employer’s pension scheme does not match their needs – are able to take out a personal pension of their own choosing. Many different pension products are available from numerous providers. We can help you to choose a private pension that takes your investment and risk choices into account, providing crucial guidance along the way.

 Annuities

Many people choose to use their pension to purchase an annuity, which guarantees them a regular income during their retirement. An individual can also choose to take 25 per cent of their pension as a tax-free lump sum and use the remainder to buy an annuity from an insurance company, which still gives them a set income for the rest of their life.

There are a number of benefits that can be attached to annuities, such as regular increases, a widow’s benefit, or guaranteed periods of payment. However, selecting certain benefits can reduce the regular income amount, so getting independent financial advice is the best way to choose the right deal for you.