Your Retirement Options
Planning for the retirement lifestyle you want …
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Having built up a pension fund during your working life, putting it to work so that you can enjoy your retirement can be complex because its not always as simple as getting the highest level of income. Your Financial Planning Consultant will guide you through the choices, but at a high level, the main strategies are summarised below:
Your retirement options
A Scheme Pension
Provides an income payment from the scheme administrator (or an insurance company selected by the scheme administrator)
Income payable for life
Income cannot usually reduce in payment
Income is taxable at marginal rate of Income Tax
Annuity
Up to 25% of the fund prior to annuity purchase is paid tax free
Income is taxable at marginal rate of Income Tax
Pays an annual income for the lifetime of the purchaser. This can continue alter death if a spouse or dependants pension is selected
Income can remain level, increase or decrease over time
Level of income based on prevailing annuity rates, which have remained low for some time
Generally no investment risk (unless investment linked annuity selected)
Level of security provided as income level is guaranteed
Flexi Access Drawdown
No need to take whole fund as one lump sum
Up to 25% of the fund can be taken as a lump sum tax free
Subsequent income payments taxed at marginal rate of income tax
No restrictions or caps on income withdrawals
Risk of income withdrawals depleting fund if they exceed investment growth
Investment risk as fund remains invested
Underlying fund value can fall as well as rise
Uncrystallised Funds Pension Lump Sum
Full access to pension fund not yet brought into payment
Up to 25% of each lump sum payment is paid tax free
The remainder of each payment taxed at a marginal rate of income tax
Additional pension savings are essential to have a sustainable income later in life
Assessment of your tax position is strongly advised before this route is taken
Removal of lifetime allowances and subsequent changes in legislation mean some investors have lower limits placed on tax free cash. Equally a small number of historic pension contracts have higher limits. References to 25% are correct in the vast majority of cases, but your Financial Planning Consultant will be able to clarify this for you.