Ask Sindie: How to dip into your pension pot

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The Independent Online

My husband and I are 65 and 63 respectively. He has an occupational pension which includes eligibility for a widow's pension. We also have state pensions and savings, including tax-exempt special savings accounts (Tessas) and individual savings accounts (ISAs), which produce income.

My husband and I are 65 and 63 respectively. He has an occupational pension which includes eligibility for a widow's pension. We also have state pensions and savings, including tax-exempt special savings accounts (Tessas) and individual savings accounts (ISAs), which produce income.

I have a personal pension fund currently valued at about £60,000. As we do not need the income at this time, should I convert it to an annuity?

AW, Hadlow, Kent

Deciding when to take income from a pension is complex and you should seek help from an independent financial adviser. If you don't need an income in the foreseeable future, there's no need to make a decision yet. In the interim I recommend you check that your pension funds are the most appropriate for your needs.

When income does become an issue, there are a number of options open to you. If you are under 75, under current rules you could purchase an annuity. Alternatively, you could go into drawdown – taking income from the fund. But this is normally recommended only if you have assets of £250,000 plus.

Another option is to phase in drawdown or the purchase of an annuity. The advantage of this is that if you were to die before all your pot was converted, the part that was left would be paid to your estate tax-free. In addition, if you went into drawdown and died before the age of 75, any remaining fund would be paid to your estate after tax at 35 per cent.

At 75, your options become more limited as, under current rules, you'll have to buy an annuity. But annuities are far more flexible than in the past and various options can be built in.

Write to Sindie at IoS Business Section, Independent House, 191 Marsh Wall, London E14 9RS, or email sindie@ independent.co.uk. Queries will be answered by an independent financial adviser. Don't enclose documents you wish to be returned. We cannot give personal replies, or guarantee to answer letters. We accept no legal responsibility for advice.

Sindie was advised by Donna Bradshaw at independent financial adviser Fiona Price & Partners. Tel 020 7611 4700.

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