Warning On Tax_Free Lump Sums

Warning On Tax-Free Lump Sums

Prudential has warned that clients who take a tax-free cash lump sum from their income drawdown plan do so at a cost to their eventual annuity.  Research showed that many clients were using this increased flexibility to pay off debts, fund holidays or new cars and were not taking an income, ultimately risking a much lower income in retirement.

Director of retirement income at Prudential Aston Goody, said “Drawdown is a valuable option for clients requiring an income prior to annuitisation and taking advantage of the tax-free cash is tempting.  However, the long-term impact on the actual income available is significant and we urge anyone considering this option to seek advise so that they fully understand the real cost of tax-free cash”.

Our view

Old news here.  Prudential are suggesting people do not know what they are doing.  Most people understand that if they draw cash early they are reducing their long term pension income.

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