Much has been made in the media recently about the new pension freedoms which have been unleashed by the UK Treasury. There have even been reports of 20-year-olds asking when they can ‘cash in’…

Like all good stories, the reality of the pension changes introduced is quite a bit different. Yes, people now reaching their pensionable age will have greater freedom to say what they would like to do with their pot.

If you are lucky enough to be 55 after 6 April 2015, the perceived limitation of having to buy an annuity has been lifted so that pensioners will potentially have control of 100% of their fund.

But, the situation will vary depending on the type of pension scheme you are in.

If you have a “defined contribution” pension, you will be eligible for the pension freedoms when you reach age 55. If your pension is ‘defined benefit’ (otherwise called ‘final salary’), you may be eligible for the freedoms, but you will need to transfer the money to a suitable scheme first. You should take advice on this because guarantees can be lost.

If you’ve got a ‘final salary’ pension as a civil servant  you may, in some cases, be able to transfer the benefits to another scheme, as above. But some public-sector schemes, known as “unfunded” arrangements, will be excluded.

And, did you know that the age you can take your pension is also increasing? From 2028 it will rise in line with the age you can take your State Pension. For someone aged between 36 and 44 now that will mean waiting until you’re at least 58.

Confused? You may well be. By all means give us a call!

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