Once you turn fifty-five, you’ll be getting close to retirement age. Perhaps you want to explore your options and know what you can do with your pension pot at this point. If so, Portafina has provided factual advice regarding what can be done with your pension.
Should You Take Money Early?
You may be wondering whether you should or shouldn’t take money from your pension early. It all depends on your circumstances and retirement plan. You should certainly avoid taking money out as a solution to a financial glitch wherever possible, however. This is because taking money out early could result in you having less to spend in your later years. If you’re unsure, speak to a financial advisor as they’re in the best position to advise you.
What You Can Do
Knowing what your options are will help you make the right decision when it comes to your pension. You don’t want to make a choice that could affect you negatively in the long term. You are able to take from your pension funds if you’re at least fifty-five years old. Below, you’ll see what exactly you can do with your pension pot after this:
Take Out Tax-free Cash
Some people simply want access to cash when they’re nearing retirement. If this is the case for you, it is possible to take out tax-free cash. Every scheme allows you to draw out a specific amount but most cap it at 25%. It is essential to note that taking tax-free cash could affect the amount of guaranteed income you get from your final salary pension, however.
Buy Annuities
For a source of stable income, you could sell your pension to an insurance company. This is known as an ‘annuity’, and you’d get a guaranteed lifetime income as a result. To make an informed decision, know that annuities are inflexible and rates have fallen over the past decade.
Pension Drawdown
When you start taking a personal pension from a personal pension scheme, it is known as pension drawdown. You can take regular payments or large sums depending on your preference and needs.
Withdraw All Funds
In the case that you want to withdraw all funds, you can take it in one go from the age of fifty-five. Do be aware, however, in many instances, it may be best to keep a fraction of the saved funds so you have more to work with in the long run.
What You Can’t Do
In most cases, it isn’t possible for you to take from your pension pot before the age of fifty-five. The only exception to the rule is when you face a critical illness. If an individual or company tells you otherwise, just be sure it isn’t a scam.
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