Retirement Income Solutions
After spending a number of years planning carefully for your retirement it is essential that you are aware of the various options open to you at your selected retirement age with regards to your accumulated pension fund.
Essentially there are the following main options
Tax Free Cash Sum
You may leave your existing pension fund with your current provider. Then, if you wish, take a tax free cash sum (TFC) (also referred to as a Pension Commencement Lump Sum) and utilise your current provider's annuity rates to purchase a conventional Lifetime Annuity (Compulsory Purchase Annuity - CPA), which guarantees a lifetime income.
Open Market Option
You may exercise a transfer of the whole value of your pension fund to another provider which currently offers the best CPA rate.
'With-Profits' Lifetime Annuity
You may use the whole of your pension fund, after any TFC has been paid, to purchase a Lifetime Annuity on a 'with-profits' basis with your existing or another provider.
Unit Linked Lifetime Annuity
You may use the whole of your pension fund, after any TFC has been paid, to purchase a Lifetime Annuity on a unit linked basis with your existing or another provider.
Third Way Annuity
You may transfer your pension fund to a provider offering a Lifetime Annuity on a flexible basis (often called variable or "third way" annuities). These types of annuity attempt to combine the certainty of a conventional Lifetime Annuity with the prospect of investment growth seen with Unsecured Pension (USP).
Scheme Pension
You may transfer your pension fund to a provider offering a Scheme Pension (usually only available with Defined Benefit pension schemes). This allows for income levels to be actuarially determined based on your personal circumstances.
Unsecured Pension
You may transfer the whole of your pension fund into an Unsecured Pension (USP), but only prior to age 75*. This allows you to vary future income levels to fit in with your overall financial plan, either by use of income withdrawal or short term annuity purchase.
Staggered Vesting
You may convert your retirement fund in stages, over a number of years (often referred to as staggered vesting or phased retirement), into income using either annuity routes or the USP route described above. This may be available with your current pension arrangement or may mean transferring to a new arrangement.
Alternatively Secured Pension
You may transfer the whole of your pension fund to an Alternatively Secured Pension (ASP), but only from the age of 75*. This allows you to vary future income levels to fit in with your overall financial plan but to a more limited extend that is available under USP.
* In the 'Emergency' Budget on 22nd June 2010 the Government announced its intention to remove the requirement to either purchase an annuity or an ASP by age 75, with effect from tax year 2011/12. Until the necessary changes are implemented, legislation will be introduced in the Finance Bill 2010 to increase to 77 the age by which members have to buy an annuity or otherwise secure a pension income.
Important Note: The value of an investment and any income from it can go down as well as up and you might not get back the original amount invested. The past is not a guide to the future.