Nearing retirement

As you get closer to retirement, there are a number of pension options and choices to make.

I can help you make the decisions that are right for you.

You might want to use your pension fund to purchase an annuity* from a suitable annuity provider. This can provide you with a secure income for life - no matter how long you live.

Alternatively, Flexi-access Drawdown means you can take an income directly from your retirement fund. If you’re thinking about this option, you’ll need specialist advice.**

Defined Contribution (DC) Pensions

Since 2015’s Pension Freedom Reforms, you now have access to Defined Contribution (DC) pensions from the age of 55 (this will change to 57 from April 2028). Income is unrestricted, provided you pay your marginal rate of Income Tax on any taxable withdrawals.

It’s possible to take up to 25% of your pension fund as tax-free cash, though from 6 April 2023 this was restricted to £268,275. Those with a protected tax free cash entitlement and/or a protected Lifetime Allowance may be able to take more than this as tax-free cash. This is potentially a complicated area, so please get in touch to discuss further.

DC pensions can now be passed to anyone after you die, not just a dependant.

If you die before the age of 75, income taken from a DC pension by beneficiaries is tax-free. If you die after 75, income is at the beneficiary’s marginal rate.

*As annuity rates can change substantially and rapidly, there is no guarantee that when you do purchase an annuity the rates will be favourable. This could mean that your pension thereafter may be less than you hoped for

**The level of income from pension drawdown is not guaranteed. There is a very real chance that you may need to reduce your drawdown income in the future, in particular if the performance of your investments is lower than expected, or you live to a greater age than originally anticipated when choosing your initial income level.

The rules governing how much income you can take directly from your pension fund may change. This could mean that the income you can take from the investment no longer meets your requirements.

The value of an investment with St. James's Place will be directly linked to the performance of funds you select, and the value can therefore go down as well as up. You may get back less than you initially invested.

The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances.

You can also access free impartial pensions guidance from the Pension Wise website, https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise, or you can book an appointment over the telephone  0800 011397.

Got a question?

Do get in touch with me if you need a bit more information about these services, or any of our other financial planning advice.