Pension-Income Specialists Age Partnership, have found that 71% of people surveyed aren't aware of how much tax they would pay if they withdrew their pension as one lump sum come April¹.
The new pension freedoms announced in the March 2014 Budget revealed the seemingly enticing option for many to withdraw their pension savings in one lump sum as of April 2015. As now, typically 25% of any lump sum would be tax-free, however following this change the remaining 75% will be taxed as income straight away, meaning some people may find themselves paying tax in a higher tax bracket and could pay as much as 40%, or maybe even more straight to the tax man.
Further research conducted by Age Partnership has identified that more than six out of every ten responders underestimated the amount of tax they would be liable for by at least £5,000, when performing an income tax calculation relating to a £50,000 pension pot withdrawal ².
These shocking results suggest that people haven't yet accessed the tools and information they need to make a truly informed decision on how best to access their pension savings. And as a result, could face an increased tax bill.
This fuels widespread concerns that people may run the risk of not having enough money to last them through their retirement years, especially if they intend to withdraw all their pension funds.
* Source: ¹ 199 people polled on the Age Partnership website 24/12/14 – 29/01/15.
* Source: ² 185 people surveyed from an Age Partnership email between 07/02/15 – 11/02/15.
Important Information - Pension Income
Pension Drawdown contains an element of risk. The value of your savings and the income taken from may go down as well as up. There is no guarantee of a fund performance meeting future income needs.
With a Fixed-Term Annuity the maturing fund may be guaranteed, however it's uncertain what it will provide as an ongoing income, which may produce a lower income after the fixed-term period has ended.
Some people may be able to take more or less than the 25% tax-free cash allowance depending on your individual circumstances.
Age Partnership is a retirement income specialist, and provides high quality guidance and advice to people approaching, at or in retirement. Its service is suitable for a broad range of UK consumers.
Age Partnership ensures it delivers exceptional service standards to customers by taking the time to understand their goals and having the expertise to ensure they get the most out of what they have.
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For further information, please contact:
Louis Auty, Instinctif Partners on: 020 7427 1442 / Louis.Auty@instinctif.com
Tora Turton, Instinctif Partners on: 020 7427 1445 / Tora.Turton@instinctif.com
Angeli Everitt, Instinctif Partners on: 020 7427 1400 / Angeli.Everitt@instinctif.com