I’m 65. Should I take my pension pot now or save it elsewhere until I do retire?

Question

I have a £77,000 pension pot. I’m 65 but I don’t want to retire for another three years. Is it better to take the money now and put it into a current account?

From

TS/Dunfermline

The pension freedoms introduced in April 2015 gave unprecedented flexibility to how people take their income in retirement. It is a tempting idea to be able to take your pension as a lump sum, and for some it will be the right approach, but there are several things you need to think about.

The first thing is taking an overall view of your retirement wealth. This includes looking at your state pension as well as any other occupational and personal pensions you may have. If you have more than one pension, then taking one as a cash lump sum may not have a major impact on your overall retirement planning. However, if this is the only pension you have then you will need to consider your options carefully.

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Do you need the money now to fund or supplement your lifestyle? If you don’t need it for any specific purpose, then it might be worth leaving it where it is.

You also need to think about what you are planning to do with the money once you get it. Interest rates are extremely low at the moment, so putting your money in a current account is unlikely to yield much in the way of interest. If the money remains invested in the markets it stands a better chance of earning decent returns and boosting your overall pension.

Another key area that is often overlooked is tax. While you can take 25% of your pension tax-free the remainder will be taxed. There is a chance that if you take it all while you are still in work you may be pushed into a higher tax bracket and pay more tax than you need to.

• UK state pension should be means tested, says International Monetary Fund

While it is tempting to take the money because you can you should consider whether you actually need to do so and the tax implications of taking the money now.

You mention that you hope to work for another three years, so with this in mind it might be worthwhile leaving the money where it is for now.

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Source Moneywise https://ift.tt/2A267g4