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Ready to access your pension pot?

It goes without saying that retirement plans are best laid carefully. You may feel like you’ve done the hard yards: you’ve considered the type of retirement you want, and how much that might cost; more importantly, you’re reasonably confident you’ve got the reserves to meet it. There are, however, a few questions that it is worth asking yourself before moving or accessing your money. Answering these questions can help ensure your hard-earned retirement pot lasts as long as you need it to.

Important information - please remember that the value of investments and the income from them can go down as well as up, so you may not get back what you invest.

Three questions to ask yourself

1.    Are you clear on fees?

The fees paid on an investment portfolio can seem insignificant over the short-term, but they stack up over the long-term. They can also put a major dent in your annual retirement income. 

A retirement pot may need to last 20+ years, so check your charges and make sure you know how much you will be paying.

For example, if you have a pension pot of £250,000 with associated fees of 0.5%, you’ll pay around £1,250 a year. 

But charging structures vary by pension provider so it’s a good idea to make sure you know if you’ll be paying for (to name a few):

  • service fees
  • ongoing fund charges
  • annual fees
  • set up fees
  • withdrawal fees
  • exit fees 
  • transaction charges

Not all providers will charge fees for these services, and the fees may vary on the providers that do, so it’s important to do your research beforehand.

Fidelity has made it a priority to keep fees low, conserving as much as possible for your retirement lifestyle. We offer free drawdown access. All you pay are your fund managers’ ongoing charges (which we’ve negotiated discounts on) and our low-cost service fee. Transaction fees may also apply. There are no annual drawdown fees, no set up fees and no withdrawal or exit fees

2. Have you checked your investment choices?

The investment choices made at the point of retirement can make a big difference to how long your retirement savings last. Take too much risk early on, and you may find that your pot can’t sustain you through retirement. Take too little and you may find that your pot doesn’t grow fast enough to beat inflation. It’s a fine balance.

There is also the question of how involved you want to be in managing your investments? Even if you are comfortable managing investments, consider whether you’re likely to want an active role as you get older. 

To help you achieve some of these things there are guidance tools available to help. Fidelity’s PathFinder is an example of a tool which is designed to help those acting for themselves.

Or, of course you can speak to a retirement adviser - typically for a fee - who can help you choose investments to provide the income you need and will monitor the level of income being paid to you to help ensure it remains sustainable. You can find out more about how Fidelity’s retirement advisers could help, here.

3. Are you confident navigating the tax system?

Navigating the tax system confidently and correctly can help ensure you won’t accidently land a big tax bill. 

Under current rules, at the age of 55, 25% of your pension savings can normally be withdrawn tax free. You can withdraw more than that, but any withdrawals over and above the 25% threshold are added to your income for the year and taxed at your marginal rate. Of course, you can choose not to withdraw any money and leave it invested in your pension pot. 

Just remember that anything you pay in tax erodes the amount you have to live on, so it’s really important to plan and consider any pension withdrawals carefully.  

Another area to consider is the limit of your pension savings. The Lifetime Allowance - the total you can hold inside pensions with tax relief applying, is currently £1.055m. This a complex pension area where some people may have higher limits because of rule changes over the years, and you may find that you hold more than this - because you’ve contributed more or because investments have grown. If this does apply to you, then there could be a tax charge of up to 55% to pay. So, if you are unsure a retirement adviser can help you navigate this complex area.

Get support with your plans

Choices at retirement can be complicated and you have some big decisions to make. Depending on the level of support you need our retirement specialists can provide both guidance and advice. 

For support when accessing or moving your pension pot our retirement specialists are on hand to help. 

If you think might be impacted by the Lifetime Allowance or would benefit from investment or retirement advice, Fidelity’s retirement services have a team of retirement advisers who can also help. 

You can call them on 0800 860 0048 for a no obligation discussion about level of support you need. They’re open 9am to 5pm, Monday to Friday. 

Pension Wise - you may also want to contact the Government’s free and impartial Pension Wise guidance service which can help you understand your options at retirement. You can access their guidance online at www.pensionwise.gov.uk or over the telephone on 0800 138 3944.

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Additional important information - please remember, tax treatment depends on individual circumstances, and all tax rules may change in the future. PathFinder is not a personal recommendation and does not provide advice that a particular investment is suitable for you. Withdrawals from a pension product will not normally be possible until you reach age 55. Pension and retirement planning can be complex, so if you are unsure about the suitability of a pension investment, retirement service or any action you need to take, please contact Fidelity’s Retirement Service on 0800 368 6891 or refer to an authorised financial adviser.

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