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Your Retirement Options
Introduction
You may have accrued pension provision from one or multiple sources, pension benefit is generally accrued either through a personal arrangement or occupational arrangement, different rules can apply to each. This can be confusing and many people accept the first offer that is given to them from their existing provider and by doing so could well be £1,000’s worse off.
| Personal Arrangements | Occupational Arrangement |
| Personal Pension Plan | Final Salary or Defined Benefit |
| Group Personal Pension Plan | Money Purchase or Defined Contribution Pension |
| Retirement Annuity Contract | Additional Voluntary Contributions |
| Free-Standing Additional Voluntary Contribution Scheme (FSAVC) |
With all Personal arrangements you have the option to shop around to see if you can get a better deal than your existing provider is offering, so it is vital you get some independent advice.
If you have a final salary scheme the likelihood is that you will best served by taking your income form your company scheme. However there are some circumstances where you may wish to consider transferring the benefits from the company scheme to your own personal arrangement such as:
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If you have a very large pension and you’re worried about the solvency of your company.
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The pension only makes up a small percentage of total assets and you want more control.
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You are single and not in good health and are worried about the death benefits from your company scheme.
With a money purchase the trustees may pay your pension directly from the scheme, arrange an Annuity for you, or you can choose to buy your annuity yourself;
Annuities Your Options
The majority of individual s opt for an lifetime annuity arrangement also known as a secured pension, there are other options available that may be suitable particularly if you have a larger pension fund known as Pension Drawdown or Unsecured Pension.
It is important that you start to think about these options well before your retirement age. If you have more than one pension plan or scheme, you might get a better income by combining them, although you don’t have to use them all at the same time.
A lifetime annuity pays you an income for the rest of your life. You buy lifetime annuities from life insurance companies or other financial institutions. When calculating their annuity rates they take account of the fact that some people live longer than others
Lifetime annuities Options
Before you buy a lifetime annuity you’ll have to decide what type you want there are many options that you have to consider before you commit yourself such as.
| Single live: | This type of annuity will stop if you die (unless you have opted for a guarantee) |
| Joint lives: | when you take out an annuity) to your spouse or partner for the rest of their |
| Level: | (no guarantee period): The income provided is the same each year for the rest of your life |
| Guarantee Term: | a guarantee payment tern generally 5 or 10 years |
| Escalation: | This can either be a fixed percentage increase say 3% or 5% per annum or linked to an index such as RPI |
| Frequency: | The Annuity can be paid monthly, Quarterly, Annually etc. |
How Much will I get?
The pension amount you will recieve from your annuity will depend on a number of factors
| Pension Fund: | The larger the size of your pension fund, the more income your will recieve |
| Tax Free Cash: | The more tax free cash you take the lower your income will be |
| Your Age: | The older you are he higher the income will be |
| Your Sex: | As women tend to live longer they will recive a lower sum than a man |
| Where You Live: | Where you live is increasingly influences the level of annuies |
| Your Options: | The more options you take as listed above the lower the initial income will be |
| Smoker Rates: | if you are a smoker you will probably get a larger income, not all companies offer smoker rates |
| Your Health: | If you suffer from ill-health you may be able to get a larger income form one of the specialist companies that offer this type of annuity |