With the new legislation on Pension Pot withdrawals coming into force from April 2015 there are considerable risks for those who take out large lump sums.
The immediate effect is to increase the value of your estate for Inheritance Tax purposes. A large withdrawal from your pension pot added together with the value of the house you own could well take you above the basic threshold of £325000 after which Inheritance tax becomes payable upon death.
If you are married and your combined assets are evenly divided between both partners then you may need to consider sharing the pension pot to keep the individual estates even to ensure maximum benefit from the basic threshold you each enjoy.
If you decide to buy further property with your windfall then remember that if it is to be in joint names the acquisition should be as ‘tenants in common’ to ensure you do own one half each and can bequeath it accordingly.
However you may use your large sum please remember to review your Will as the amount was probably never taken into account when the Will was drawn up
Remember also the need for a Power of Attorney just in case the shock of receiving a large lump sum renders you incapable of managing your own financial affairs!
Asset and Property Protection Wills become much more important in order to ensure your loved ones eventually benefit from your accumulated retirement savings.