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Retirement Income Options


You may well have been saving for a number of years into a personal private pension scheme in order to provide a good, or at least adequate, income in retirement.

Having put so much effort to save for retirement, it is a sad fact that many people then make the wrong decision about where to obtain their pension from. This can reduce their potential retirement income by up to 30%, every year for the rest of their lives.

You can avoid this by being aware of one very significant legal entitlement - to buy your pension annuity from any company, not just the company that operated the scheme. This is called the "open market option" and can substantially increase income in retirement.

 

Retirement Speeches • mabels.org.uk

 

What's new? Phased Retirement for anyone (2016)

Phased retirement was introduced to add flexibility to drawing benefits from a personal pension. Basically, it divides your pension fund into one thousand little policies allowing you to draw the combination of tax-free cash and annuity income from each one separately. The concept is to encash (vest) the exact number of plans each year to meet a target income.

As most of the cash released comes from the tax-free cash element of the policy initially there is very little tax liability in the early years. Over the years the annuity element will rise and eventually this will provide the majority of the income.

The main advantages of the system is that it allows you to adjust your income levels at will in the early years and to leave most of the fund invested whilst drawing an income. Annuity purchase is thus delayed and spread over a number of years rather than taking place all at once. The concept is very flexible but the main disadvantage is that most of the tax-free cash is used to provide income and cannot be drawn as a lump sum.

These days phased plans are often combined with income drawdown to give the greatest possible flexibility but the administration of these plans can be complex. At age 75 any remaining funds that have not been vested must then buy their annuity (or tax-free cash.). Phased Retirement -


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Retirement Income Options

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