By Alex Buck of Redmayne Bentley

ARE you ready for the new Pension Freedom which starts on April 6?

You will then be able to shape your pension to match your lifestyle.

New pension rules are giving people greater access to their pension funds. People will not be pushed into using their life savings to buy an annuity, an insurance policy that converts your pension pot into an income for life. There will be much greater flexibility in how you take your pension, giving you the option of using your pension like a bank account, withdrawing payments as and when you like from the age of 55 and taking the 25 per cent tax free element as you go.

However, you would need to be mindful that a pension is designed to provide an income for life. You need to consider other factors including the cost of living, the effects of inflation and mortality rates.

The 55 per cent ‘death tax’ on pensions is also being abolished for defined contribution schemes. Beneficiaries named on the scheme may be entitled to the pension when its owner dies.

How will this affect me and what should I be doing about it?

It is a good idea to find out what your pension is worth and what your options will be at retirement. A lot of this information can be easily gathered from your current provider. It is then wise to have an independent review which will lay out all your options and provide guidance as to the best course of action.

If you are at, or approaching retirement, you should be looking at your priorities and working out the minimum you will need to live on, as well as how much money you are likely to spend on luxuries such as holidays. You can then weigh up your likely pension income and the best way for you to draw on it to suit your lifestyle.

These changes are not only significant for those approaching retirement, they now offer greater incentives to invest in a pension. There are still tax incentives for investing in a pension that mean for a basic rate tax payer £1 gets invested for every 80p contributed and higher rate taxpayers receive 40 per cent tax relief on contributions up to £40,000 a year. Non-taxpayers can invest up to £3,600 a year and still get tax relief, and pensions can also be started for children. Money invested in a pension is free from capital gains tax and you may be able to pass on your pension at death free of inheritance tax. However, other taxes may apply depending on how beneficiaries decide to take any funds.

Risk warning Investments and income arising from them can fall in value and you may get back less than you originally invested.

Tax treatment depends on the specific circumstances of each individual and may be subject to change in the future.

Please note, Redmayne-Bentley is not a provider of pensions, nor a pensions adviser. We do offer investment services for self-invested and personal pensions.