Janet is 55, in full-time work and earns £25,000 a year. She plans to retire at 66 and is confident that her income from her company pension and state pension will meet her needs. Janet also has an additional pension plan worth £60,000.
What are Janet’s objectives?
Janet wants to withdraw £60,000 from her additional pension plan so that she can buy a new car and help her daughter through university. Janet knows that only 25% of the lump sum (£15,000) will be tax-free. This means she’ll pay a higher rate of tax on the remaining funds £45,000).
What does Janet get?
Janet’s adviser recommends a three-year Fixed Term Income Plan. This will allow her to withdraw £15,000 cash tax-free upfront. After that, Janet will receive a taxable income of £15,787 a year for the next three years. At the end of the term, Janet will have withdrawn all of her money without paying the higher rate of tax.
Janet takes her pension without paying higher rate tax
What are the risks?
Just so you’re aware, your income isn’t guaranteed for life – it’s only for the term you select. Your income will stop if you die before the end of your selected term, but we’ll pay a death benefit.