Your portfolio 30 / 31
Pension investments grow tax-free
and are passed on at death outside the
taxable estate. If death occurs before
the age of 75, beneficiaries pay no
tax at all. Conversely, 75 per cent of
pension withdrawals are taxed, which,
when added to other income such as
wages, can trigger higher levies.
The grim reality
They also need to sustain a retirement
of 30 or so years, even though pension
funds suffered £30bn in dividend cuts
by UK companies this year. But reality
is overtaking theory right now. People
will raid their pensions to help loved
ones – so this is the most sensible way.
You must be aged over 55 to access
your pension. Any salesman or website
that says otherwise is at best illegal
and will see you hit with a 55 per cent
tax bill – if you don’t lose it all.
Take from your 25 per cent taxfree
allowance only, which you can
withdraw without taking an income
You must be aged over 55 to
access your pension. Any
salesman or website that
says otherwise is at best
illegal and will see you hit
with a 55 per cent tax bill – if
you don’t lose it all
from the rest of your pot. “This
is important,” says Fiona Tait at
Intelligent Pensions, not only to avoid
tax, but also because “taking income
could mean future pension savings
are restricted”.
To do this with a workplace pension,
you may have to transfer to a flexiaccess
drawdown (FAD) plan.
“You may have to take financial
advice,” says Tait, “especially if you
are in a final salary pension, so the
costs may outweigh the advantages of
access to short-term cash.”
KEY FIGURES WHEN DIPPING INTO YOUR PENSION
£40,000
55
25%
£4,000
– standard
annual pension
contribution
allowance
– minimum age
at which you can
withdraw money
from your pension
– amount of your
total pension you
can withdraw
tax-free
– annual pension
contribution allowance
once you withdraw
more than 25%
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