Most people now have more options when it comes to their retirement choices. But generally they’ll still want their pension income to last their lifetime – so careful planning is a must. A way in which you can do this is by seeking independent financial advice.

Since 6 April, when Britain’s pension system underwent a seismic change (known as ‘pensions freedom day’), we’ve been asked many different questions by our clients and by new clients that have came to us about the reforms and how they may affect them.

Everyone needs some knowledge of pensions and how they are changing, so we’ve provided answers to some of the questions that were frequantly asked.

Q. What has changed?
The changes are designed to give extra flexibility with how you use your pension savings from age 55 onwards. For many people, taking a tax-free cash sum and/or buying an annuity (a guaranteed income) was previously the only option. But this is no longer the case.

Q. When did the changes take effect?
The changes took effect on 6 April 2015, with some smaller changes to the rules having been in place since March 2014.

Q. Who will be affected by the changes?
The changes give extra flexibility to anyone aged 55 or over with a ‘defined contribution’ pension.

Q. Will I still have to buy an annuity?

No. However, annuities may still remain an important option. You now also have the option of a flexible access pension or withdrawing cash direct from your pension fund. Before making a decision, it’s important to consider each of the options, taking into account the benefits, risks and tax implications of each.

Q. What are the tax implications?
Other than your initial 25% tax-free cash sum entitlement, pension income and cash withdrawals remain taxable. You should take care if you are considering withdrawing amounts of money that could put you into a higher income tax band.
You can still pay into a defined contribution pension after you access your pension fund. But if you take flexible access income or cash withdrawals from your fund, the maximum amount you can pay in each year without incurring a tax charge is £10,000.