Today the new Pension Freedoms come into force allowing UK pension savers to fully cash in their pension pot.
Yes – you have got that right – from today you can fully cash in your pension pot and say goodbye to the constraints of your SIPP, SSAS or Company Pension. So what’s the catch – with pensions there is always a catch – well it’s tax.
Few people will grasp the amount of tax that they might have to pay if they fully encash their pension pot as only 25% can be withdrawn tax-free. The balance of the pension fund will be taxed at marginal tax rates, meaning up to 60% in some cases.
For many pension savers with small pots the tax will most likely be at the basic rate (20%) although the way this is applied can mean a higher deduction which then needs to be claimed back.
Should you cash in your pension? This will depend on your particular circumstances, however for a lot of people this could make sense. Check out our case studies which we will update as we implement the new rules and provide advice to clients.