Take a tax free cash lump sum
The majority of pension schemes will allow their fund holders to obtain a tax free lump sum, which is derived from funds in their current pension. A lot of people seem to think that this tax free lump sum can only be obtained during retirement, which is actually not true.
One thing that pension holders must take into account is that taking a tax free lump sum and reducing a pension size is a major decision. This should only be done if this will benefit the individual on a financial basis in the long term and should not be used as a quick fix for financial problems.
Generally, taking a tax free lump sum prior to retirement will mean that an individual will want to invest elsewhere. For this, there will usually be transfer fees involved and the individual needs to make a wise decision as to where to put the cash.
We can help out
- We can help to make a complicated process extremely simple.
- We can help to ensure that every aspect of this process is easy to understand.
A lot of time and energy can go into figuring out the most financially viable options. This is where we can help to ensure that the important decisions are made based on the correct information, saving time, energy and lots of stress. A lot of people could find a tax free lump sum to be extremely beneficial.
More and more people are becoming wise to the fact that they can indeed, take a tax free lump sum from their pension. Typically this value will vary for each pension and each provider, but generally, 25% is a figure that should be easily obtainable,
Rules and regulations relating to pensions change, with the last major change coming in 2006. This has meant that people can take a large sum of their pension now, but still keep their original pension. Age does not come into the question; people can obtain their cash lump sum now.
Drawdown is now one of the most well known and popular ways to withdraw a lump sum of capital from a pension scheme. This works slightly differently to an annuity, which allows individuals to swap their current pension fund for an ongoing income instead. The advantage of using Drawdown is that the pension holder can withdraw a lump sum of capital, but still keep the rest of the pension in place. This means that the individual will still have long term financial security.
The only thing that is not particularly useful about Drawdown is that once the lump sum has been withdrawn, the individual can no longer make contributions to that particular pension. That being said, the individual can invest in other pension schemes.
During Drawdown, the pension will release a tax free lump sum from the fund itself. Usually, pension providers will assume that an income is also needed, but to void this, individuals simply need to select the 0% income option. This will ensure that the remainder of the fund is invested for potential growth.