Income in Retirement

When you come to take your retirement benefits, there are two main routes you can follow:

• Purchasing an ANNUITYANNUITY
  A contract you buy from an insurance company, using the lump sum of money such as the proceeds of your pension fund, to guarantee you an annual income for life or for a period of time [e.g. ten years]. with a provider that guarantees you a regular income for life. These contracts can be tailored to suit your individual needs (eg to include your spouse, to increase with inflation) but in essence once you have purchased your package, then your capital has gone. All pension contracts will give you an OMO (OPEN MARKET OPTION)OMO OPEN MARKET OPTION
  Your right at retirement to buy an annuity from a provider other than the one which administered your pension fund while you were working. and these allow you to see whether your income needs can be improved by a different provider.
  
  
• Entering into a contract whereby the fund you have built to finance your retirement is directly used – ie payments are made out of the accumulated pot. This type of arrangement offers no guaranteed income and may erode the fund over time. However it does allow for any funds remaining in the pot upon death to be passed on to family members, provided the scheme is set up properly. This option is only available up to age 75, though the current Government has entered into a consultation period which has had the effect of increasing the upper age to 77 for the time being. Any tax free cash entitlement must currently be exercised by age 75, or lost.

In both cases, you are likely to be entitled to a tax free lump sum taken from your fund. This entitlement will be 25% of the fund, unless special arrangements have been built into your scheme to protect a higher figure.

Choosing a retirement income option is a big decision, and is often an irrevocable one. We strongly recommend that you get good independent advice before making up your mind. Contact us to arrange a free initial consultation to discuss your options.