Retirement options

The Scheme gives you flexibility and choice in how you take your retirement benefits.

This section gives you an overview of the different options available to you both within the scheme and outside of the scheme.

You should make use of Pension Wise, the Government’s free, impartial and independent guidance service to help you understand your choices. Visit www.pensionwise.gov.uk for more information.

You may also wish to speak to an independent financial adviser (IFA) about the options available. You can find details of an IFA in your local area by visiting www.unbiased.co.uk.

What are my options at retirement?

You will have the option of taking up to 25% of your savings as a tax-free cash lump sum and with the rest, you can choose any one or a combination of these three LifePlan options:

An annuity is a type of insurance policy that provides a regular income, in exchange for a lump sum. The lump sum will usually be a result of saving regularly in a pension scheme. An annuity can also be called a 'pension'.

This option is only available to you if you transfer-out your benefits at retirement to a suitable pension provider (usually an insurance company). Pension providers vary the amount they charge for the same type of pension so it is worth asking a number of companies to provide quotations.

The amount of pension you will receive depends on the type of pension, or annuity, you buy. You could choose:

  • Whether your pension is paid for a fixed period or for the rest of your life.
  • Whether or not your pension will increase each year.
  • To have a pension paid to one or more of your dependants on your death after retirement (e.g. one-half or two-thirds of your own pension); and
  • To have the payment of your pension guaranteed for a period. This means that if you were to die within the guarantee period, the value of the unpaid pension would be paid to your dependants as a lump sum.

Other options may also be available at retirement and full details will be provided to you at that time. When you choose your pension, you should think about your own circumstances and you should also remember that the more extra benefits you choose, the lower your annual pension will be.

To see the impact of changing your retirement age on the value of your pension benefits, visit the Pension modeller.

You can choose to draw an income from your account (subject to income tax at your marginal rate) as and when you like, with the remainder staying invested.

This option is only available to you if you transfer-out your benefits at retirement to a suitable pension provider (usually an insurance company). Different providers will charge different fees and will offer different investment options. It's important to consider what different providers will offer you and what charges will apply.

If choosing this option, you should consider the following:

  • You can vary the amount you take and when, or you can take the same amount each time. It's up to you.
  • It's important to plan how much you’ll need in retirement. It may be tempting to spend too much of your savings in the first few years but this could mean in the later years you have to rely on the State Pension alone, which may not be enough to meet your needs.
  • Your savings are invested, therefore they can go down as well as up. There is a risk that returns are poor and your savings don't last as long as you thought they would.
  • Charges will continue to be taken from any savings left invested so it is important to consider the impact they have on your funds.
  • This choice allows you to keep your options open; you can adapt if your circumstances change. For example, you could later buy an annuity with any remaining savings, or cash out.
  • If you plan to continue saving into a pension, now or in the future, income drawdown may further restrict the amount you can save into a DC pension.
  • On death, your retirement savings will be passed on to your beneficiary and may be subject to tax.

You can choose to take your account as cash, either as a one-off lump sum for the entire value of your account, or as a series of smaller lump sums. Each time you take a lump sum, up to 25% is usually tax free and the remainder taxed at your marginal rate.

Under this option, if the value of your retirement account is above £10,000, you will first need to transfer your account out of the Scheme to a retirement provider. Different providers will charge different fees and will offer different investment options. It's important to consider what different providers will offer you and what charges will apply.

If choosing this option, you should consider the following:

  • It's important to plan how much you’ll need in retirement. It may be tempting to spend too much of your savings in the first few years but this could mean in the later years you have to rely on the State Pension alone, which may not be enough to meet your needs.
  • If you choose to withdraw your account from the Scheme as cash and you don’t need to spend all of your savings straight away, it's important to consider what you are going to do with them and the impact inflation will have. If your savings don't at least keep up with inflation they will be worth less and less over time.
  • Taking cash may have implications for people with debt or those who are entitled to means-tested benefits. If you might be impacted in this way you should seek further guidance.
  • If you plan to continue saving into a pension, now or in the future, taking cash may further restrict the amount you can save into a DC pension.
  • If you die after having taken cash, it becomes a personal asset and would be treated as any other cash saving on your death.

For more information about these options please go to LifePlan.

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