The changes to the pensions system announced in the Budget trumpeted a new era of freedom and choice for pension savers. However, with the full details of the pension changes still to be considered, Jonathan Watts-Lay highlights a few common pitfalls those approaching retirement should watch out for
1. Tax, tax, tax – when is £10,000 really only £8,500? Until April, the new rules allow up to three pension pots worth £10,000 or less to be taken as a cash lump sum. While that sounds great, it is easy to forget that this is subject to income tax, so those that do cash in a £10,000 pension pot are unlikely to actually get a £10,000 cheque from their pension provider. Make sure you take this into account when budgeting for your retirement. Example: Alan is 60 (the minimum age for taking a small pot as a lump sum) and earns £19,000 a year. He pays tax at 20%. Alan has a £10,000 pension ...
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