However, another equally important point is ensuring one is tax-efficient. This is vital, as Mr Hampton says “every penny counts” when managing money, particularly when it comes to the tax savings a person may be able to make.
Taxes can, of course, vary from every pension or savings pot a person may hold, and having an understanding of how each one works is likely to be the most useful and efficient approach an individual can take.
Mr Hampton has advised individuals to “be smart” with how and when they take withdrawals, and of course, the amount they withdraw each year. This is because this could have a significant impact on the tax bracket a person actually falls into.
For example, under current rules, a quarter of a person’s pension pot can usually be taken tax-free. Individuals will need to, however, pay Income Tax on the rest which remains. As a result, then, people could choose to take this as a lump sum, or to take smaller regular amounts, depending on what suits them best.
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