If you have a personal pension, are over 55 and looking to retire, then from Monday 6 April you can cash in your entire ‘pension pot’ and take the money straight away as a lump sum.
But while “receiving a good chunk of money to spend on a holiday, new car or home improvements to celebrate retirement sounds great,” UNSION national pensions officer Glyn Jenkins is warning that it comes with dangers as well.
Writing on the Left Foot Forward website, he warns that the first of these is tax: “up to a whopping 75% the pension pot could be taxable and much of that could be at the higher tax rates as it will all count as income for that single year”.
And on top of that, he warns: “There are more potential dangers for pensioners than just losing a lot of your money to tax unnecessarily”.
These include the potential for mis-sold investments and scams to “liberate” your pension money at a cost of extortionate fees and the risk of losing it entirely, plus the obvious dangers of trading in a secure retirement pension, linked to inflation, for insecure short-term gain.
“The advantages for the government’s coffers are clear to see,” Mr Jenkins writes of the new changes.
“However, as with the mis-selling of PPI and endowment mortgages which seemed too good to be true, it is no great leap to see this policy coming back to bite us.”