What Will You Do With Your Pension?

Retired? From yesterday you can now get your hands on your pension pot drawing it down as a lumpsum or converting an existing annuity into cash. What are you planning?

Emma Wall 7 April, 2015 | 1:23PM
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Happy New Tax Year! As well as a brand new ISA allowance of £15,240, a new SIPP allowance and the chance to earn £10,600 before paying any income tax as of yesterday we are now living in the age of pensions freedom.

While the buzzword may seem a tad political, the changes first announced by Chancellor George Osborne in last year’s Budget and developed further in last month’s speech will have a real impact on today’s pensioners and those approaching retirement. Because as of yesterday, if you are pensionable age you can get your hands on all your retirement savings – every last penny. There may be charges for withdrawing your savings as a cash lump sum and only the first 25% of your workplace pension can be taken tax free but if you are happy to swallow these costs you are free to spend it as you wish.

The Government has billed this as grown up options for grown up people – trusting pensioners to spend their hard won savings wisely. But the cynics cite stories of lottery winners who blew their pay-out in months only to be penniless within a year. We do have some indication of what to expect. Morningstar research from Australia where there is a similar pension scheme in place suggests people are not stupid with this kind of freedom.

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About Author

Emma Wall  is former Senior International Editor for Morningstar