With the government bringing out new rules for pensions anyone looking to retire soon should read the pensions choices leaflet.

Although you can gain access to your full pension pot beware of the tax implications. Recently, one of our clients looked at withdrawing £215,000 from a pension. We pointed out this would result in a tax bill of over £90,000 once their self employed income was taken into account. In this case they would even loose their personal allowance.

We helped them by assessing their potential income for the next few years and worked alongside an IFA to create a strategy that was efficient but afforded them a good standard of living.
Looking at this example in detail:

They took 25% of their pension pot in a tax free lump sum of £53,750. As the client is still receiving an income from his business he invested this in 2 buy to let properties. We worked with local estate agents to ensure the client was generating a satisfactory yield to generate money for the future.
This client could have decided to hold these properties in a trust to provide for his children in the future. However, this was not appropriate in this particular case. If this is something your are considering we work with specialist solicitors who we can put you in touch with.

The IFA helped the client package the remaining pension pot into a income drawdown product. This was advice provided to the client based on their personal circumstances which might not be suitable for everyone. Income drawdown can be considered as a high risk strategy.

This blog post does not qualify as advice only an example of one person. We are trying to help educate our clients’ into thinking about this complicated area early. You should contact an IFA (Independent Financial Adviser) or we can put you in touch with one of our trusted partners.