Just a very basic pension question, based on a random thought.
If you have a pension, lets say for easy maths its worth 200k at retirement age (65) - The plan says something like you can take out 50k and then get 10k a year, or take nothing and get 15k a year. What happens about when you die? So suppose you die at 66 having only taken out 15k for that year - what happens to it? Likewise, what if you live for another 30 years - that's 450k due at 15k a year but your pot is only 200k?
I surmise that you are talking about a "defined contributions pension".
If so, yes you can take up to 25% of the pot tax free.
The remainder when you draw from, whether turned into an Annuity or Drawdown is taxable.
Any decisions you make about how to take your pension then become key.
If you decide on converting the pot to an Annuity that will give you a fixed pension (some Annuities offer yearly increases but they start lower AFAIK) but as living costs rise that is not best for everyone.
If you go for a Drawdown Pension....the received wisdom was to draw half to 2/3 of the yearly growth but as the stock market has taken a battering the growth of any has been dismal. Therefore, should you draw from low to negative growth (losses) you are reducing your capital e.g. your pot of say £150,000 is shrinking and will likely run out to zero depending on how long you live!
Note ~ should you die before the pot runs out that remainder becomes part of your Estate but IIRC is not subject to Inheritance Tax.
PS the above is my recall of the highlights of things I have had to know of and think about.
PPS unless you are very stock market savvy and even if you are..... IMO you need to speak to an IFA (Independent Financial Advisor) to help you with your pension planning.
