Did you know the minimum retirement age increases from 50 to 55 on 6th April 2010? As a result an estimated 3 million people may be adversely affected by this important change.
Those who are over the age of 50 prior to 6th April and want to take their benefits before the age of 55 must review their options now, ensuring that they have started to receive benefits before midnight on 5th April 2010.
Alerting you to this change now, means you have ample time to take financial advice and make any necessary changes to your financial plans before the 5th April 2010 deadline.
So what can you do?
Well, here are two ideas for you to consider.
Those between 50 and 55 could choose to buy an annuity, which would provide a regular income for life in exchange for a lump sum payment. If an annuity is bought before the 6th April 2010 it is possible to avoid being affected by the increase in retirement age. However, if you are not ready to trade your pension fund for a guaranteed income just yet, there is a more flexible alternative.
The Income Drawdown option: Tax Free Lump Sum or income - or both?
The income drawdown option allows you to draw upto 25% of your pension fund as a tax-free lump sum. From the remainder of the fund income can be drawn if required while the pension fund remains invested. The income can be increased or decreased, within set limits, to suit your requirements. This approach allows you to retain the right to draw an income from your pension before your 55th birthday without having to commit to an annuity.
If you are affected by the increase in the minimum retirement age and might need a tax-free lump sum or an income from your pension fund before your 55th birthday, taking action now to pre-empt the increasing minimum retirement age could be the solution. However, we stress it is vital that you also consider the impact this could have on your income later in retirement. It is also important to remember that income drawdown is a much riskier option than an annuity as it doesn't offer a guaranteed income, and what you receive is entirely dependent on investment performance, which may rule it out for many.
If you wish to make an appointment to discuss the increase in the minimum retirement age please contact us on 01244 347583.