From April 2015 you will be able to take the whole of your pension plan fund in one lump sum.
Before you do though here are five things to consider:
1) If this money has to last you for the rest of your life divide the (net – after tax) amount that you are going to receive by the number of years life expectancy that you have. Then add another five years just to be on the safe side! Spend the money at that rate and you might be OK;
2) Do a bit of tax planning. Does it make sense to take it all in one go (and potentially have to pay a lot of income tax at 40% or 45%) or might it be better to take the money over a number of years and keep the income tax take down to 20% or lower?;
3) Why not just take the tax free cash lump sum of 25% of the fund value and if you can spend that as if it were income over a number of years? You can then decide what to do with the rest of the pension fund in say five years time;
4) Have you worked out what you absolutely need to have as an income to pay all the vital bills? Maybe, if you can buy an annuity for that amount and then use the rest of the pension fund in a more flexible manner;
5) If you do take the fund as a lump sum where are you going to invest it to make sure it lasts you long enough?
Freedom and choice in pensions gives you a lot of choice but with that choice comes the responsibility of using the pension fund sensibly.
