Deferring Your Pension

Deferring Your Pension - Leaving It

New Pension Freedom rules have paved new ways to access your pension pot. These new rules have made pension very flexible. The earliest you can access your pension pot is when you reach the age of 55.

Be aware that you may choose to delay taking your pension at a later age leaving your pension pot to grow. Most people select a retirement age of 60 or 65 when starting their pensions but this is not set in stone as you can defer the date you access your pot.

Let’s consider why some people leave their pot to grow. The Office for National Statistics have revealed that by 2041 woman will live to around 86 with men living to around 83.Llife expectancies are on the rise. The retirement phase in our lives will also stretch in terms of time. The knock on effect of this could result in in people wanting to remain in work for longer. If you are still working or have income from other source such as rental income from property, you may not need any income from your pension.

This means that your pension can remain invested and could benefit from any additional investment performance in that time. However, poor investment performance could lead to a smaller pot. You can also make additional contributions to your pot to build up your retirement benefits.

Leaving your pot doesn’t mean you cannot touch it. Your pension is still available for you to access at any time over the age of 55. You have the options of taking lump sums or look to create retirement income at a certain point in the future.

It is important that you dig deeper and explore the terms and conditions of your pension policy. Some pensions come with guarantees such as guaranteed annuity rates. These could provide a higher level of income than what is readily available in the market. Yet, conditions like these tend to have special condition such as they need to be taken by certain age. Therefore, it is beneficial to understand any entitlements which could be lost through leaving your pension pot.

Pensions are a very tax efficient way to save and pass of wealth. Pensions can be helpful if one of your goals in life is to leave a legacy to loved ones. Pensions are generally protected from inheritance tax when you die. This means that when you die, the money in your pot can be passed onto your beneficiaries. This creates opportunities for the beneficiaries usually meaning they can buy an income, take a cash lump sum or they can transfer it into a new pension in their own name.

Leaving your pension pot doesn’t come risk free. There are a multitude of factors which need to be considered if you want to leave your pension untouched. Nobody can foresee the future making it difficult to see what position you will likely be in when reaching retirement. Things such as your sources of income, your health and life expectancy, policy charges, attitude to risk and capacity for loss are examples of things which need to be thought about before making any decisions.