Sep 28, 2020
What is pensions freedom?
Pensions freedom really did open pensions up and make them more useful in retirement.
No longer were you forced into buying an annuity with a low rate income, or restricted to a level you could take from drawdown.
Instead it meant that all restrictions of access were taken off of pensions. Meaning you could access them either in the form of an income or by taking lump sums from your pension.
So why does this matter to you?
It means that many types of pensions are available to access from the age of 55, so you are not tied into waiting for a specific retirement date.
Also you are not tied into taking a set level of income, so you can vary this as your needs change. Many people will take a higher level of income to start and then drop the income down as other income starts (such as State Pension). This means that earlier retirement is more possible than it was before.
You are also able to access lump sums from the pension, without the need to take an income from the pension. So you could take a lump sum out while you are still working to pay off debts or a mortgage, or to make home improvements. Then leave the pension to grow again and replace what you have taken.
I do recommend caution though. You do have to consider the impact of taking lump sums out or take higher levels of income on the remainder of your retirement. This is why most pension companies require you to take financial advice why using drawdown so that you don’t cause yourself financial harm by accident!
Used correctly pensions freedom is a great tool to improve your retirement and life. Used wrong without assessing the effects can cause financial trouble.