Things I Need To Know About My Pension In The UK
My pension and what pensions are just about as important to every individual, as salaries are. This is because your pension or my pension ( if it is your own pension) is key to having a happy retirement and enjoying your old age. A good pension scheme would set you up nicely to take that trip around the world, you have always dreamed about, or settle in the countryside with enough money to sustain you. As an individual saving up in your pension pot, there are a number of things you need to learn about your pension, in order to enable you to get the best out of your pension. You may have asked yourself the following; can I cash in my pension? Will my pension help me later on in life? Will my pension provide me with an income? There are a number of technicalities and changes which came with the April 2015 reforms, and it is necessary to familiarise yourself with the workings of the new rules guiding pensions in the UK.
My Pension: Important Things To Know About Pension In The UK
The reforms on pension rules in the UK set the age limit of accessing one’s pension pot at 55, and also gives the pensioner total freedom over the pension. This is one reform in the pension rules which has been subjected to a number of other rules. Below are some of the important things to know about your pension.
• Pension Schemes: There are mainly three types of pension schemes available to a pensioner. You can have more than one pension fund and it is required that you understand which you have to. This is to enable make the best retirement decisions. The three types of pension schemes available to an individual are; State pension, Defined benefit pension and Defined contribution pension. The state pension is usually paid by the government and serves as a secure income for life. Building up your state pension entitlement is done by making National Insurance contributions. The state pension age is set around 65.
My pension: Workplace pension:
Workplace pensions is the broad name used to refer to defined benefit pension and defined contribution pensions. The defined benefit pensions is a fixed rate pension, which your employer contributes to your pension based on how many years you have worked, your earnings. It is usually accessible around 65 but is subjected to variations. Defined contribution pension, on the other hand, is not fixed, but is subjected to fund’s investment performance. A defined contribution pension pot is built primarily with contributions from the individual. It is usually accessible without any restrictions from 55.
• Retirement Age: The older the age you retire, the more pension you are entitled to. This is because longer years help you build a large pension pot. Early retirement in the UK is allowed, but you cannot claim your pension until you reach state pension age. Workplace pensions, on the other hand, vary from one pension provider to the other but is usually set around 55. Retirement due to ill health is treated differently, and retirement at any age is allowed with all full benefits enjoyed.
• Tax: This comes in when you are cashing in your pension. Every pensioner has the first 25% of his pension withdrawn at a time, tax-free. The remaining 75% is taxable income. Anyone who decides to take his whole pension pot at once has 75% of his whole pension taxed. On the other hand, a pensioner who takes it in small sums has 25% of the sum withdrawn on each occasion, as tax-free income.
• Accessing My Pension Overseas: The reforms now allow a pensioner to use a UK-registered pension scheme, notwithstanding their location. There are a number of options that are available to you, as a pensioner moving abroad. You could leave your pension in the UK pension plan, where it will continue to be held, till you reach the pension age and can access it. Your pension is then levied as normal, 25% tax-free and 75% taxable. Another option is transferring your UK pension to an approved arrangement in your country of residence. This is possible if the pension plan, you plan to transfer to is a Qualifying Recognised Overseas Pension Scheme (QROPS). The last option is paying into your pension scheme from overseas. This allows you to use a UK pension plan even while abroad. The only hitch in this arrangement is that tax relief may be limited or totally unavailable.
My Pension: Can I Unlock My Pension?
• Pension Unlocking: A common question asked by pensioners is “Can I access my pension before 55?. This is as a result of the large number of firms that advertise pension unlocking on the internet. Pension unlocking is a term that is used to refer to the act of accessing your pension pot before 55. It is actually a scam which would leave any pensioner at the risk of losing all his pension. It is advisable to stay away from such terms, as the only legal conditions for accessing pension before 55 is ill health and having a protected retirement plan in your pension scheme.
• Options For Using My Pension Pot: As a pensioner approaching pension age, it is important for you to know and consider all your options for using your pension. You have different options which are all ideal for different reasons. You can decide to take your whole pot at once. This is ideal for investments. You can also buy an annuity with your pension, this will give you a guaranteed income for life. You can also use an annuity to provide income for a dependent when you die. Another option available to a pensioner is taking your pension in small cash sums at intervals, and leaving what remains to grow tax-free till your next withdrawal. A pensioner can also decide to leave his pension pot untouched till a later date, as this potentially provides more income when accessed.
Altogether, knowing all these important facts would help you as a pensioner make the right decisions in choosing a pension plan and also how to execute it. This knowledge coupled with good financial advice will definitely guarantee you a happy retirement.
My pension: contact us
If you would like to discuss your/my pension if a friendly IFA then please feel free to contact us for more information. We will put you in touch with someone who can help you to discuss any pension you have. There are various things you need to think about when you want to use my pension to access cash. Can I cash in my pension? You maybe able too yes! Contact us for more information