The pension freedoms are a set of policy changes in the United Kingdom that were introduced in April 2015 by the then Chancellor of the Exchequer, George Osborne. The changes gave people over the age of 55 greater flexibility in how they can access their pension savings.
Specifically, the changes removed the requirement for people to buy an annuity with their pension savings and instead allowed them to take their savings as a lump sum or in smaller amounts as and when they choose. The changes also increased the amount that people can take as a tax-free lump sum. These changes were intended to give people more control over their retirement savings and provide greater flexibility in how they can use those savings to support themselves in retirement.
The pension freedoms in the UK give people who are over the age of 55 greater flexibility in how they can access their pension savings. The main options available to people are:
Take a tax-free lump sum: Under the pension freedoms, people can take up to 25% of their pension savings as a tax-free lump sum. This means that they can withdraw a large amount of money from their pension pot without paying any tax on it.
Take smaller amounts as and when they choose: Rather than taking a lump sum, people can choose to take smaller amounts of money from their pension pot as and when they need it. This is known as "flexi-access drawdown" and allows people to take money out of their pension pot in a more flexible way.
Purchase an annuity: The pension freedoms do not remove the option to purchase an annuity. An annuity is a financial product that pays a fixed income for the rest of the annuitant's life in exchange for a lump sum.
Leave the money untouched: People can also choose to leave their pension savings untouched and not take any money out. This can be a good option for people who do not need the money, or who want to leave their savings for their beneficiaries.
It is important to note that these options come with different tax implications and financial ramifications, so it's recommended to consult a financial advisor to understand what is the best option for you.
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