KEY FIGURES WHEN DIPPING INTO YOUR PENSION
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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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