The exact tax savings of a Purchase Life Annuity vary according to your own personal circumstances but for both basic and higher rate taxpayers they are certainly worth considering and often overlooked.
Another popular alternative is to invest the tax free lump sum with the objective of producing an income. Many people have found this route attractive as it preserves access to the capital, which is not the case if the entire fund is used to buy an Annuity. The downside to this option is generally an increased level of capital risk, assuming of course that any asset class other than cash is used for the investment.
Sufficient income and no need for capital Some people are in the great position of having sufficient income for their needs with no need for additional capital.
Despite this fortunate position care is still needed to make the right decision.
Should the lump sum be taken and invested? Would using it to buy a Purchased Life Annuity be advantageous? Could the lump sum be put to some other use?
These are just some of the many questions which people in this position may wish to consider.
No going back Whether you decide to take your tax free lump sum or not, think all the options through carefully because whatever decisions you make cannot be changed.
An Annuity can never be altered and once you have taken the tax free lump sum there are rules preventing it being recycled into a pension.
There is no one size fits all approach to retirement planning; each set of circumstances requires an individual solution.
Independent financial advice can help you consider all the options fully to make sure that you get the important decisions right.
Finally, even if you decide to take independent financial advice do some research beforehand, read up on the main options you have available, use a pension annuity calculator to look at sample figures, think about what is really important to you.
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