Your tax-free pension lump sum; how much should you take and where should you invest it?
If you have an occupational or private pension, you’re able to take some of your pension fund as a tax-free lump sum. The question is, what should you do with it?
If you’ve been saving into a pension, before you reach retirement you’ll have to decide how much you’d like to take as a tax-free lump sum and - at some point - what you’d like to do with it. With personal or stakeholder pensions, you’re able to take 25% as a tax-free cash lump sum. If you’re a member of a pension scheme through your work, the limit may be lower, depending on the rules of the individual scheme. This article will outline some options, but it’s not designed to replace the role of independent financial advice.
The FSA says half a million people have been encouraged to switch their pensions when it was bad advice.
The FSA says some firms have given bad advice, but that doesn't mean that pension switching is always the wrong thing to do.
If you have a private pension – either one that you’ve taken out through your work or directly with an insurance provider – you may have been given bad advice if you were told to switch your pension funds or to consolidate your pensions into one plan. Over the last four years hundreds of thousands of people have been advised to switch their pensions – often in the hope of getting a better return. Just because you’ve been advised to switch doesn’t mean it’s the wrong thing to do, but the Financial Services Authority is concerned that some people would have been better off leaving their money where it was.
Most of us put off saving for retirement, but research shows women retire on far less than men.
If you’re saving enough for your retirement, you’re in the minority as most women don’t. Whatever you do, don’t rely on the state pension.
How do you picture your retirement? Joining the Saga generation and jetting off for adventure holidays at the drop of a hat? Moving abroad for warmer weather? Or counting the pennies before you go shopping? Hmm, maybe not. But the fact is that we save less for our retirement than men and are more likely to struggle financially once we stop work. It's partly because women are more wary of locking money away in a pension. So, what’s the answer?
