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Retirement and your pension

The Government has proposed substantial changes to the way you can take your money from defined contribution pensions in retirement. The changes were announced by the Chancellor in the 2014 Budget and are due to be introduced in April 2015 with some interim changes until then. The proposed changes will allow people to access their savings as they wish at the point of retirement, subject to their marginal rate of income tax.

As you approach retirement, you have important choices to make about what to do with your pension. Anyone with a personal pension or a defined contribution pension (sometimes called a money purchase pension) at work can choose how to take their pension as income in retirement.

On retirement, your lifestyle and spending patterns may change. There are many products that you can buy to provide you and your loved ones with a regular source of income in later years.

Choices to make about retirement

You can take your pension income at any age from 55 years old and, as proposed in the Chancellor’s Budget, you will have choice and flexibility as to how to take out your money – this may be as cash, as an annuity or drawdown. Government policy and rules will set out exactly how this will work. Deciding when to take it and what type of product to buy will affect your income throughout your retirement. You will need to decide:

  • when to take your pension as you manage the change from working to retirement and whether to wait until April 2015 or later to take income from your pension
  • if you want to take 25% of your pension as a tax-free lump sum, or have a higher income
  • if you to take all of your pension as cash if it is worth less than £30,000. If you have up to three pension pots of up to £10,000, you can take them as cash
  • what type of retirement income is right for you – if you need to provide for dependants, if you would like your income to increase over time, and if you are willing to risk your income going down as well as up

Your Retirement Your Choice logoSee our Your Retirement, Your Choice guide to help you understand your choices when it comes to making important decisions at retirement from 6 April 2015.

The ABI’s Code of Conduct on Retirement Choices (pdf 1.68MB), has been in force since 1 March 2013. It sets out how ABI members help their customers understand the choices they need to make at retirement, different ways to take your income, and how to shop around.

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