What is income drawdown?
Pension are like savings in a cloud, with the cloud being the tax implications. 25% of your pension pot is tax free, but the remainder is taxed at your marginal rate as if you had earned it.
Consideration must be made to when you plan to draw your money and use of multiple tax years to extract large lump sums may be favorible.
You can currentlyaccess your pension at age 55 and there is no minimum amount of income that must be drawn, irrespective of age. This access will move to 10 years below state retirement.
You can withdraw the 25% tax free without restricting your future pension contributions, however if you take any income you can now only contribute £4000 including tax relief. Claiming a small pot is exempt from these rules.
Individuals maybe able to leave their pension fund untouched for as long as they like, without the necessity to drawing any income. This means, a pension can be used to pass wealth to future generations, if required.
It is important to make sure your beneficiaries/nominations are correct and up to date to make the best use of pension death benefits.
Invest Southwest are an award winning Independent Financial Advisers that offer pension advice . We are FCA approved and offer a free initial consultation to establish your needs.
If we can help with any of your needs do not hesitate to contact us on 01934 310653