Guide To Pension 2015 - Martin Lewis

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MoneySavingExpert.com
Guide to Taking
Your Pension 2015
Written by Martin Lewis, Amy Roberts and Johanna Gornitzki

SPONSORED BY
SECTION TITLE
CONTENTS
Foreword – Independence and integrity
Who’s this guide for?
Martin’s Big Picture Introduction
Take the long view
Taking your pension money – an introduction
Leaving money in your pension
Take lump sums, leaving the rest invested
Take 25% tax-free, then buy a
Take 25% tax-free, then buy an annuity
Getting help with your decision
FAQs
2 MoneySavingExpert.com
FOREWORD
Independence and integrity
“This guide is
written with
absolute editorial
independence”
WHO IS THIS GUIDE FOR?
Who is this guide for?
Who this guide isn’t for.
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MoneySavingExpert.com 2
INTRODUCTION
Martin’s Big Picture Introduction
INTRODUCTION
Martin Lewis
Money Saving Expert
CHAPTER 1
TAKE THE LONG VIEW
Take the long view
www.mse.me/WhenWillIDie which
CHAPTER 1
TAKE THE LONG VIEW
A 65-YEAR-OLD A 65-YEAR-OLD
MAN WOMAN
75% 79 75% 82
50% 87 50% 90
25% 94 25% 96
9% 100 14% 100
Source: ONS 2014
CHAPTER 1
TAKE THE LONG VIEW
The state pension
www.mse.me/statepension
Work
Rental income
Interest from savings or pensioner bonds
Dividends (income)
Property
Inheritance money
Spending your capital
www.budgetbrain.com
CHAPTER 1
TAKE THE LONG VIEW
How much money is in my pension?
CHAPTER 1
TAKE THE LONG VIEW
Other benefits you can take advantage of
Pension credit:
Heating grants:
Winter fuel payments:
Help with council tax:
band at www.moneysavingexpert.com/council
Help with your rent:
Help with health costs:
www.dwp.gov.uk
www.gov.uk www.ageuk.org.uk
CHAPTER 2
Taking your pension money – an introduction
CHAPTER 2
What do I do if I don’t know who my pension provider is,

or I can’t remember the details?
CHAPTER 2
What you can do with your pension – the basics
The Simple Bit You Choose
25% Tax-free lump sum – simple 75% Taxed – lots of choices
Most suitable for
CHAPTER 2
Most suitable for
For example, you take £10,000 out of a £100,000 pension, £2,500 of it is tax-free, and £7,500 is
taxed as income.
Most suitable for
Most suitable for
CHAPTER 2
Most suitable for
Martin’s Pension Pointer

A taxing question
With option 3 –
With option 4 –
CHAPTER 2
With option 3 – leaving the cash in your pension
CHAPTER 2
With option 4 – income drawdown
CHAPTER 2
The different pension options explained

What What’s Do I get an What happens
happens? tax-free? income? when I die?
Keep the cash in your

pension
Take lump sums leaving

the rest invested in cash you withdraw
money as and when
your pension until you each time as an
you need it
need it income
You can choose to

Take a lump sum out, drawdown money
you take money
the rest in a drawdown each month to
product
income
an annuity is it
Buy an annuity
annuity with the
your income
No, you take the
Withdraw all the

money in one go
it into an income
You can combine these options
CHAPTER 3
Leaving your money untouched in your pension
CHAPTER 3
When should I take my money?
The Pension Timeline

Age 55 Age 62-65
Legally access State
your pension retirement age Death?
Savings
CHAPTER 3
Be careful of getting penalised
What happens to my pension when I die?
1. Take the whole fund as cash in one go:
2. Take a regular income:
3. Take periodical lump sums:
CHAPTER 4
Take lump sums leaving the rest invested

in your pension until you need it
How does it work?
You take out £10,000, £2,500 of it is tax-free, and £7,500 is taxed as income.
the winner.
CHAPTER 4
How do I actually get the money out of the pension?
Charges when you take out your money
CHAPTER 4
What is the tax situation?
For example, most people earn up to £42,386 a year (2015/16) before paying the higher 40% rate
of tax. So if you earned £30,000 then took a taxable £10,000 out of your pension it’d still be at the
20% basic rate. If you took £15,000 out, £12,385 would be at the 20% rate, the rest at 40%.
CHAPTER 4
What happens when I die?
Quick question
Q. Can I continue to put money into my pension
once I start taking money out from it?
CHAPTER 5
Take 25% tax-free, then buy a

flexible income drawdown product
What is a drawdown?
Where is my money invested?
How do I drawdown my money?
CHAPTER 5
What are the charges?
Cost of going into income drawdown
Provider Annual cost of drawdown
Aegon
Aviva
Bestinvest
Fidelity
Friends Life
Hargreaves Lansdown
Legal & General
LV
Prudential
Royal London
Scottish Widows
Standard Life
Zurich
CHAPTER 5
How much income should I take from my drawdown product?
CHAPTER 5
CHAPTER 6
Take 25% tax-free, then buy an annuity
“A good annuity at the

best rate can still be
CHAPTER 6
The importance of enhanced annuities
The importance of comparing across the market
1. Find out what your pension provider pays.
2. Check out the rates.

(www.abi.org.uk
www.moneyadviceservice.org.uk
CHAPTER 6
The different sorts of annuities
life. These annuities have the
CHAPTER 6
Variations on a theme
CHAPTER 6
You can combine annuities
www.moneysavingexpert.com/tax-calculator
see www.incometaxcalculator.com
www.taxvol.org.uk
“This way, you’ll mix

your levels of risk and
perhaps provide a greater
retirement income.”
CHAPTER 6
AN ANNUITY STOPS PAYING WHEN YOU DIE
– Choose a joint life annuity
– Choose a guaranteed period
– Choose to build in an annuity protection lump sum (value protection) – On death the
CHAPTER 6
Annuity vs Drawdown
Income drawdown Annuities
How flexible is it?
Is my money safe?
What options do
I have?
What happens when

I die?
Can my personal
circumstances get
me a better deal?
CHAPTER 6
Quick question
Q. Can I cash in my annuity?
CHAPTER 7
GETTING HELP WITH YOUR DECISION
Getting help with your decision
Getting free guidance
www.pensionwise.gov.uk
“Deciding how to turn

your pension pot into
an income is one of the
most important decisions
you will ever make.”
CHAPTER 7
GETTING HELP WITH YOUR DECISION
Getting independent financial advice
www.vouchedfor.co.uk pension-check
www.unbiased.co.uk
Percentage fee:
Fixed fee per service:
Hourly charge
CHAPTER 8
FAQs
Q. Will the amount I withdraw affect any benefits I get?
Q. I have been called by a company that says I can invest my

pension with it and get massive returns, should I go with it?
CHAPTER 8
Q. Can I change my final salary pension into a

money purchase pension?
25 years, times that by 25 and you’d be set for a pension of £33,325 a year.
Q. Do I have to stop contributing to my pension when I start

taking money from it?
NOTES
and pitfalls for people planning their retirement, increasing the importance
you on the best way to reach your personal retirement goal.
To get a free review of your pension and retirement plans with a well-rated
www.vouchedfor.co.uk/pension-check
020 3641 0346

Or simply return this form and we’ll ask a well-rated local adviser to get in touch
Name Phone
Send this form to: VouchedFor, 8 Waldegrave Road, Teddington TW11 8HT
Your pension review will be without charge. It gives you the opportunity to discuss general questions, and identify
be able to provide you with a clear price and proposal. There will be no obligation to continue with that proposal.
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VouchedFor.co.

Your Free Pension Guide

Why read this guide

Help making one of the biggest decisions of your life

Your savings, investments & pensions £

Your message for the adviser

Written by Martin Lewis, Amy Roberts and Johanna Gornitzki

Taking your pension money – an introduction

Leaving money in your pension

Take lump sums, leaving the rest invested

Take 25% tax-free, then buy a

Take 25% tax-free, then buy an annuity

Getting help with your decision

Independence and integrity

Who is this guide for?

Who this guide isn’t for.

Martin’s Big Picture Introduction

Take the long view

9% 100 14% 100

Source: ONS 2014

The state pension

How much money is in my pension?

Other benefits you can take advantage of

Winter fuel payments:

Help with council tax:

Help with your rent:

Help with health costs:

Taking your pension money – an introduction

What do I do if I don’t know who my pension provider is,

What you can do with your pension – the basics

The Simple Bit You Choose

25% Tax-free lump sum – simple 75% Taxed – lots of choices

Most suitable for

Most suitable for

Most suitable for

Most suitable for

Most suitable for

Martin’s Pension Pointer

With option 3 – leaving the cash in your pension

With option 4 – income drawdown

The different pension options explained

Keep the cash in your

Take lump sums leaving

You can choose to

No, you take the

Withdraw all the

You can combine these options

Leaving your money untouched in your pension

When should I take my money?

The Pension Timeline

Be careful of getting penalised

What happens to my pension when I die?

1. Take the whole fund as cash in one go:

2. Take a regular income:

3. Take periodical lump sums:

Take lump sums leaving the rest invested

How does it work?

How do I actually get the money out of the pension?

Charges when you take out your money

What is the tax situation?

What happens when I die?

1. Take the whole fund as cash in one go:

2. Take a regular income: