Since the arrival of the A-Day rules last April, it is now easier for those interested in winding down their working hours or changing careers in order to stave off a mid-life crisis to do so.
If you are interested in still keeping one foot in the working world at age 50, but also want to draw down some money from your pension, it could now be permissible under the A-Day regime.
Retirement options now include the facility to withdraw up to 25 per cent of an individual’s pension as a tax-free lump and then to defer drawing any additional income from their retirement fund. There are a number of benefits that could prompt you to take a 25 per cent tax-free lump sum from your pension at 50, the first year you are eligible to take this cash, while leaving the rest of your pension in ‘storage’.
The most immediate one is that such a scenario provides you not only with an amount of disposable cash, but also with the opportunity to continue to grow your remaining pension in a tax-sheltered environment. That way, you would avoid paying capital gains tax every year.
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Those individuals who opt to take their tax-free lump sums might wish to put them to use in a variety of ways. Some might want the money to fund a shift to part-time work, such as consulting, or to embark on a second career in a less lucrative field that interests them.
Another increasingly common scenario could be to use the money to prepare for full retirement. Some people who are a few years away from leaving the office behind for good could opt to use the lump sum to pay down their mortgage or buy a holiday home. Others may choose to gift this cash to their children.
Employers are also becoming more amenable to the idea of their workers embracing phased retirements. Since A-Day, many companies have amended their rules to allow people to take larger golden goodbyes, according to a survey by Mercer, the actuarial and human resources consultancy. In most cases, a particular employer’s view on phased retirement depends on the circumstances of the worker who is considering it.
If you would like to discuss your specific options or requirements, please email or contact us. |
