27 May 2014

Thinking about Withdrawing your Pension?

One down-side of withdrawing a whole pension plan (expected to be possible from April 2015, and already possible with "Flexible Drawdown"), is that you get taxed on most of it as income. That is likely to push many people into higher rate tax (or even additional rate tax) even if they are not there already.

So here's a way of getting around that - by investing in an EIS (Enterprise Investment Scheme) you are entitled to income tax relief to the tune of 30% of the value invested. That's not going to suit everyone, but depending on your reasons for withdrawing, it's worth considering.

There may also be benefits should you die - if you don't withdraw a pension and don't use it to generate an income before you are 75, currently it could be subject to 55% tax. But in an EIS, after two years it is likely to be free of tax in the hands of your beneficiaries, since Inheritance Tax won't be due if it's a qualifying investment.

Worth a thought - contact me if it's worth more than that to you!

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