There are two parts to pensions; the part when you are saving for your future called the accumulation phase and then the part when you start taking benefits from your pension called the decumulation stage. This section deals with the decumulation phase.
Since April 2015 savers have been able to access their entire pension fund from age 55*. 25% of the value of your fund can be withdrawn tax free, however the remaining 75% can also now be withdrawn, subject to income tax at the highest marginal rate.
*Legislation may be changing the date that you can take personal pension benefits to fall in line with your State Retirement Age (SRA); this would mean that you can take your pension 10 years prior to your SRA.
Income drawdown allows you to take an income directly from your pension fund while leaving the remainder invested for potential further growth.
This type of plan allows you to control how and when you receive your retirement income whether that is on a regular basis or ad-hoc payments as and when you need a little extra. You can choose a range of investments but remember that the performance of the investments will affect the income you receive.
An annuity gives you guaranteed income for life and is commonly purchased at retirement. Using a lump sum from your pension fund or savings to buy an annuity means you do not need to worry about budgeting for an unknown period.
Remember that you can buy your annuity from any provider; there are various types available. As Independent Financial Advisors we can help you to decide if an annuity is the best option for you, and if so, we can help you utilise your ‘Open Market Option’ to ensure you receive the maximum income available in the market.
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