Q. I have 2 personal pension plans and am thinking of taking the benefits from these in the near future. I’m 52 now and have read that the age that I can use the proceeds from these plans will change in April 2010. Can you tell me more?
A. Yes, you’re right, the rules will change at the start of the next tax year. At the time of writing (January 2010) you are able to take the benefits of your personal pensions from age 50. On April 6 2010 this will change to age 55.
So, if you think that you’ll need to utilise the proceeds prior to your 55th birthday, you’ll need to take action now. And by now, I mean immediately, as you’ll need to submit all the necessary paperwork to your pension provider asap – they’ll need sufficient time to process all the paperwork prior to April. Also, don’t forget that if you are purchasing a pension annuity you can shop around all providers for the best rate by using the Open Market option (OMO).
One alternative to an annuity is to utilise Unsecured Pension (often referred to as Drawdown). This is where you can take your entitlement to the 25% tax free cash lump sum, with the remainder of the fund continuing to be invested (preferrably with the right amount of risk for your comfort zone). You can elect to receive an income from this fund subject to Government limits.
The good news is that the lower limit is zero so you don’t actually have to take an income. Do bear in mind though that Unsecured Pension should only be used by those with a minimum pension fund value of 100k.
