In his spring 2015 Budget, then-Chancellor George Osborne’s substantive changes to private pensions represented a sea-change to the way people were able to access their pension:
But three years on, have the changes really represented pots of gold at the end of retirement rainbows? Read our review of pension freedoms three years on to find out.
In terms of advantages, on a basic level, pension freedoms do what they say on the tin — providing the flexibility for people to align their retirement income to their circumstances and take ownership of their pensions by accessing them when they want, for whatever reason they choose.
It’s a move that’s proved popular. A July 2018 HMRC report revealed that approximately 1 million savers have accessed £17.5 billion in the three years since introduction. And £2.3 billion of flexible pension payments were made between April and June 2018 compared to £1.7 billion in the first quarter.
When pension freedoms first hit the headlines, some feared it would encourage retirees to wipe out their savings with wild spending on holidays, helicopters and luxury yachts — like bamboozled early 90s lottery winners.
There’s been little evidence of this, but there are catches to withdrawing as much cash as possible immediately.
For instance, if you dip too deeply into your pension at one fell swoop, you might inadvertently push yourself into a higher income tax bracket and perhaps more importantly, run out of money in retirement.
You should always seek professional advice before making major decision about your pension, but here are three options:
Your circumstances and future plans will inform your decision — but in simple terms, it’s important to calculate if your plans are sustainable in the long-term.
Chancellor advises that a canny rather than carefree approach to pension freedoms unlocks their best benefits. And as ever, we’re happy to help you solve the conundrum.
If you’re seeking straightforward financial management advice, call 01204 526846 to chat