What are Pension Freedoms?

Back in 2015, the government introduced some major changes for the UK pension system. The drive behind the change was to offer people more financial freedom in retirement, giving them the option to either stick with their existing pension, or swap it for a more flexible option.
It’s useful to know what these pension freedoms are, and how they will affect you in the future. Here’s more information.

What are the new pension options?

Thanks to the changes, you’ve now got a lot more choice when it comes to your pension. For example, if you’ve got a workplace pension, you may want to stick with it. Alternatively, you may want to use the funds to buy an annuity, or even cash in the entire pension pot in one lump payment.
There are other options too. A Flexi Access Drawdown enables you to receive an adjustable income during your retirement, and an Uncrystallised Funds Pension Lump Sum means you can get your pension in chunks.
You’re free to select any one of these options, or combine them.

What option is best for you?

Your pension choice depends entirely on your personal circumstances, and what will work best for you in the future.
For example, some people may benefit from receiving one lump sum, as they may want to invest the money into purchasing a property, then use the rental income to support themselves financially. For other people, a ‘draw down’ option is better, as it means they can access funds as and when they need to.
If you’re not sure which option is right for you, Elevate Financial Services can help you to identify which will best support you in your retirement.

Some commonly asked questions

If I take my pension as a lump sum, is any of it tax-free?

The first 25% is tax-free. That’s why some people choose to just take 25%, then put the remainder into another pension product, or leave it where it is.

Can I still pay into my workplace pension while enjoying the benefits of other pension products?

The Money Purchase Annual Allowance (MPAA) lets you do exactly this. You can still pay contributions to your workplace scheme, while making the most of another type of pension, like an uncrystallised funds pension lump sum. Bear in mind though, your yearly allowance towards the DC benefits will be lowered to £4,000.

What annuity should I choose?

There are a lot of options available, and what you’ll get from each one depends on various factors, including your health, whether you smoke or not, and how much you’ve got in your pension pot. Again, if you’re unsure which annuity to select, it is wise to seek financial advice.

Are some pensions riskier than others?

Yes, they are. A high-risk pension product may generate more funds in retirement, but if the investments don’t perform well, you might lose money instead. Whether this option is suitable for you or not depends entirely on your attitude to risk, and whether it’s a financially viable choice or not.

Get in touch with the experts

If you’d like more information about pension freedoms, and what your options are, get in touch with Elevate Financial Services today. You can reach us by calling 0203 8131 495.