April 2015 pension freedoms

There has been no change to the amount of tax-free cash you can take - usually this is up to 25%.

You are able to take more than 25% as cash, however that would be taxed at your marginal rate. Use our pension tax calculator to see how taking a taxable cash lump sum from your pension would impact the amount of tax you might pay.

If you die before age 75, you can be reassured that any income or lump sum payable will pass to your beneficiary tax-free. However, should you pass away after the age of 75, then any income or lump sum that the beneficiary receives will be taxed at their marginal rate of tax.

An income could be the continuation of an annuity through a guarantee period, or income from a drawdown plan. A lump sum, meanwhile could be received through an annuity using ‘value protection’ or a lump sum from drawdown.

Whilst you can now take your pension savings as cash in one go, or as a series of lump sums, it’s important to remember that usually the first 25% will be tax-free but the remaining 75% will be subject to income tax. And, if you take your pension in the same tax year as you’ve received a salary or other taxable income, then you could find yourself propelled into the next tax bracket with even more tax to pay.

If you’re considering taking your pension pot as cash use our tax calculator to see how much the taxman will get.

If you’re considering using your pension savings to redeem all or part of an existing mortgage or to clear some debts, then it is worth seeking financial advice to find the best solution for your circumstances.

Some of the changes to rules and taxation of annuities can mean they could now offer better value.

The guarantee period death benefit option, offered with annuities, has now had the maximum limit of 10 years removed. This means that you may be able to provide a continued income to your dependants in the event of your death for up to 30 years.

In addition, where historically annuity death benefits (where you choose to provide for others using annuity options such as a guarantee period, dependant's pension or value protection) were taxed at a higher rate than under drawdown, this has now been brought into line - so the benefits are now taxed the same.

You may be able to move your pot into income drawdown. Drawdown allows you to draw income from your pension fund whilst it remains invested, with any income taken being subject to income tax.

New drawdown policies bought after April 2015 (known as "flexi-access drawdown") have no limits on the amount you can take as income from your invested funds. Your investments can go up as well as down, and there is a chance that you may exhaust your fund and run out of money in retirement. See our drawdown risk calculator to find out more.

Any drawdown policies bought prior to April 2015 will continue to have income limits, unless they are transferred or converted into a new policy.

If you are considering drawdown it is important to get some guidance or advice about its suitability for your personal circumstances.

Your financial intermediary can provide advice (though may charge a fee for their advice) but if you don't currently have one, you can find someone on thepfs.org or www.unbiased.co.uk.

Alternatively every retiree is entitled to some free guidance from the UK government's 'Pension Wise' service from MoneyHelper.