Financial Planning for Imminent Retirement
There are many options available for using an accumulated pension fund to provide benefits in retirement. This is not simply a case of whether you give up part of your pension in return for a tax free lump sum but even that decision would be dependent upon the type of pension you have and how much you have accumulated.
Until a few years ago, most people were left with no option other than to purchase an annuity with their accumulated pension fund. This has turned into something of a lottery dependent upon the level of interest rates when you happen to retire. However, there are more flexible options available today that do not commit you to a once and for all decision and enable you to draw a pension whilst still keeping many of your options open. Drawdown, as it is called is not right for everybody and there is scarcely a more important time to take independent financial advice than during the years immediately prior to retirement.
In simple terms, Drawdown is the process of taking pension benefits from your accumulated fund without having to purchase an annuity. Whereas this facility has been available for some years, the opportunities increased significantly in April 2015 with the introduction of Flexi Access Drawdown which enables an individual to draw as much of their pension fund as they like from age 55, subject to income tax in the year of withdrawal. Of course, these extra opportunities are accompanied by significant risks. The flexible options need to be managed so as to avoid paying too much tax on one hand and running out of money on the other. However, with the right advice, Flexi Access pension is a considerable enhancement to many individual’s financial situation in retirement.