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Your new 'flexible friend' in retirement


From April 2015, those aged 55 and over will be able to withdraw funds from their pension, almost as easily as if it were a bank account. The name of this new way of accessing pension money will soon become familiar: it is called flexi-drawdown.

Flexi-drawdown allows you to draw out as much money from your pension fund as you like, when you like. You can even take your entire savings fund out as one lump sum if you wish. The first 25% of the withdrawn pension fund is tax-free, and the rest of the money withdrawn is taxed as income at your highest marginal rate.

Flexible access to pension money is already available to those entering retirement, but there is a much stricter criteria on who can qualify for this, and how much they can withdraw; from 6th April this year, the rules will change and therefore flexi- drawdown will be open to anyone over the age of 55 with a private pension. 

Under these new rules there are no withdrawal limits at all. However, money needs to be managed in a careful and controlled way. The maths to flexi-down is quite simple: the more you withdraw in the early years, the less you will have available to provide income later in life. 

It is important that you don’t over withdraw now and risk running out of money later.

Many people approaching retirement will be considering using the new flexi-drawdown facility and investing the funds that they withdraw to provide a regular income. They may also use this as a way of easing gently into retirement, reducing their working hours down to part-time and topping up their reduced salary from their pension.  Using a financial adviser to help map out a plan for retirement can ensure any money accessed is done so in the most tax efficient way. It can also ensure the money withdrawn is appropriately invested to provide the desired income.

Annuities, which provide a regular and secure income for life in return for a lump sum of money, will still have a role to play in retirement income provision. Many people will still use them as part of their retirement wealth planning. However they may now be more likely to consider purchasing them later on in life, rather than ‘at retirement’.

Flexible access to pensions is one of the reasons why pensions have become fashionable again, and not only as a means of planning and funding retirement. Many people are seeing the changes which come in to power in April provide new opportunities for the creation of tax-efficient inter-generational wealth. Pension money is no longer restricted on how you can access that money or pass it on to future generations.

Embracing the new retirement culture, Sanlam has launched its new ‘flexi-access’ facility. Available from the 6th April, the facility will be available on some of our pension products enabling clients to have access to their funds in retirement. This new facility will be provided to clients without charge.

The new pension rules which come into effect on the 6th April 2015 will significantly affect the pension landscape and the way in which people at retirement access their pension savings. If you are approaching retirement it is important you seek financial advice before making any decisions or commitment to accessing your pension money. Decisions made at retirement, especially regarding the purchase of annuities, often cannot be retrospectively reversed.

If you would like to find out how we can help you plan for retirement, please do not hesitate to get in touch, email letstalk@sanlam.co.uk.

Date issued: 12.02.15

Please remember any views or facts expressed above are based on information received from a variety of sources which we believe to be reliable, but are not guaranteed as to accuracy or completeness. Any expressions of opinion are subject to change without notice. None of the information should be regarded as advice. Past performance is not a reliable indicator of future results. Investing involves risk and the value of investments and the income from them may fall as well as rise and is not guaranteed. Investors may not get back the original amount invested. Any tax treatment is dependant upon individual client circumstances and may be subject to change.

Sanlam is a trading name of Sanlam Wealth Planning UK Limited (Reg. in England 3879955) and English Mutual Limited (Reg. in England 6685913). English Mutual Limited is an appointed representative of Sanlam Wealth Planning UK Limited which is authorised and regulated by the Financial Conduct Authority.

Registered Office: St. Bartholomew’s House, Lewins Mead, Bristol, BS1 2NH.

Investing involves risk and the value of investments and the income from them may fall as well as rise and are not guaranteed. Investors may not get back the original amount invested.