Wanting to realise some real cash? You could consider
cashing out your pension, however you may want to
think about the tax implications of doing so. Here we take a look
at cashed out pensions and what they entail when it comes to
Cashing Out Your Pension
Are you one of those unhappy buyer of annuities?
You now have a reason to smile because the Government will allow
you to swap annuities for cash. This will take effect starting
April 2017, according to the Treasury.
The secondary annuity market was created as an extension of the
pension freedoms that was first announced in 2014
and applied from April 2015. What does it entails?
- No more tax restrictions of up to 70% for annuities sold to a
- Allow annuity buyers to swap it for cash in the future.
- For people with annuity of negligible amounts, they can swap it
for a single, lump sum.
With the 70% lifted, how much tax you’ll have to pay for selling
Because the sale would be treated as income, it will be taxed on
your marginal or highest rate.
How much is your annuity worth if you sell it in the new
There is no specific answer to this, what with the factors that
influence annuity rates, such as gilts or the interested paid on
government bonds. If the annuity rates are higher, the gilts are
likely to be cheaper, which means the sale will fetch you a
handsome amount. But that’s not the only consideration. A buyer
will also affect the final cost, as the annuity’s worth will depend
on how much it will cost “someone of your age and life expectancy
to buy the same annual income for life that you currently receive
from the policy”, according to a report in Telegraph.
Before you think of selling your annuity, make sure to check out
the annuity rates in the market.
Think you may be due a tax refund? Apply here to get
your tax back.