According to provider data collected by the Financial Conduct Authority (FCA), some 57,568 clients aged over 55 have fully encashed their pension fund as an uncrystallised funds pension lump sum (UFPLS) since the new rules came into force. The vast majority of these (47,331 or 82%) withdrew pots up to £30,000 under the triviality rules while, at the other end of the scale, a small number of customers (137 or 0.24%) took pots worth £250,000 or more.
Given that there are over 17 million people aged over 55 in the UK, the number of pensioners actually drawing their fund in full seems a far cry from the hoards driving around in a drop-top Lamborghini with their hair neatly covered by a Hermes scarf that the popular press would have us believe!
That said, however, the issue of income tax paid on 75% of the fund value, particularly for those drawing larger pots, is not an issue that can be taken lightly.
If a client has the available funds to invest (and of course a suitable risk profile) it is possible to reduce this liability to a much more palatable level or even mitigate it completely.
Funds placed into an Enterprise Investment Scheme attract Income Tax relief of 30%.
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