10 Most Common Questions About Pensions

When you take the time to learn about your pension, you will have a much easier time getting the most of it. This information can also help you to avoid making serious mistakes that could end up costing you a lot of money over time. If you want to plan for retirement, it is important that you make a point of educating yourself as soon as possible.

1. Should I dip into my Pension?

It can be tempting to use a quarter of your pension money for a nice holiday or even a new car, but it’s not always a good idea. Just because you are able to use this tax-free cash doesn’t mean you should. Take the time to think about how it will affect you in the future.

2. Will Tax-Free Funds Come to an End?

For years now many people have asked whether or not the government will put an end to tax-free pension funds. While anything is possible, most experts say that it is very unlikely to actually happen. It could certainly benefit the government financially, but it would be a political nightmare of epic proportions.

3. Will There be More Cuts to Annual Allowances?

Lifetime and annual allowances have seen cuts in the past, and it is possible that further slashes to pensions will be made by overly zealous politicians. The fact is that nobody is sure what will happen in the future, so it is important to focus on today. There is just no point in worrying about this.

4. Is it a Good Idea to Transfer my Defined Benefit Pension?

Some people are very tempted to trade in their policy for an attractive lump sum, but this is something you should think about very carefully. You need to ask yourself if the money you receive from cashing in your policy will sustain you through retirement. The last thing you want is to be left with nothing by the time you are sixty years old.

5. Should I an Annuity?

Considering the present rates, it’s not a good idea for most people to buy an annuity. While it does come with a lifetime guarantee, there is quite a bit of risk involved. There is a very good chance that you could be left with a very low income that won’t sustain you.

6. What is the Most I Can Get from my Pension?

Those who don’t have an annuity will need to be careful about what they take from their pension. Before you make the decision of how much to take out, you have to consider what kind of lifestyle you want to live through retirement. One of the worst financial mistakes a person can make is taking too much from their pension and needing to rely on borrowing money from short term lenders to get by.

7. Am I able to Turn my Entire Pension into Cash?

It is possible for you to take your entire pension in a lump cash sum, but it’s not recommended for most people. Unless you don’t have very much in your pot, you should avoid doing this altogether. You will be taxed for any money you withdrawal from your pension after the 25% government match has been exceeded.

8. Do I have to Use Money from my Pension?

You are absolutely not required to live off of your pension, and in fact it may be a good idea to not use any of your funds if you are still employed. Anyone who doesn’t need the money in their pension should try not to spend anything from it. The whole point of your pension is to have money to live on through retirement.

9. Is the Money I Withdrawal from my Pension Taxed?

Any of the money that you take out of your pension to spend on anything will be taxed just like traditional income that you earn from a job. If your total income for a given year is beneath the annual tax allowance, you won’t be required to pay anything.

10. Is it Possible to Cash in my Annuity?

Most people are not able to cash in their annuities, though there are a few insurance companies that allow for it. Phoenix Life was the first business to offer this option to their customers, but so far not many other companies have decided to do the same.

If you want to have enough for retirement and avoid all sorts of financial difficulties in the future, you need to learn about your pension. When you posses this knowledge, it is much easier to make the right decisions. Too many people are reckless about their pension pots, and as a result they don’t enough money to live on when they are older. The answers to these questions can help you live a comfortable life through your golden years.

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