A more in Depth look at Post Retirement

Currently, the majority of people can, from age 55 onwards, have the option to access their

retirement savings. However, you do not need to do anything just because you have reached age 55, as your retirement savings can remain invested and you can continue to make contributions, should you wish to do so.

Whenever you decide to access your retirement savings, you can normally use the value of your plan value (do these words make sense?) to take a cash lump sum. This can be all of your retirement savings or just some of them – but only 25% of the amount you take will be free of income and capital gains tax. As an alternative, you could choose to buy a secure income (an Annuity) with the full amount taken or take up to 25% of the amount taken (delete this second word ‘taken’?) free of income and capital gains tax and (receive?) a smaller secure income.  Or, you could access your retirement funds via an Income Drawdown plan or indeed a combination of all these options. Nor do you have to have stopped working to take your retirement savings from your plan.

An Annuity: Is a way to use some or all of your retirement savings to buy a secure, guaranteed, income for the rest of your life (this known as a single life Annuity).  The income you receive is paid on a regular basis, similar to a salary, and is taxed as earned income. If you have poor health or other factors which can affect your health, you may be entitled to a higher income (an enhanced Annuity).

If you choose am enhanced Annuity, there are many options to choose from that will have an effect on the amount of income you finally receive. This list below outlines some of the common options available. It is not an extensive (should this really be ‘exhaustive’?) list and we would always recommend that you seek independent advice before you buy an Annuity as once you have decided how to take your income and you are in receipt of that income, you cannot change your options.

A widow’s/widower’s pension: Provides an income for a spouse, partner or other dependant after the annuitant dies (this is known as a joint life Annuity), the amount they receive can be 1%-100% of the annuitant’s income and the amount they receive is set when the Annuity is bought.

Income payments: Will be paid at regular intervals – most commonly as a monthly income, but you can choose quarterly, half yearly or annually. The payments can be paid in arrears (at the end of your chosen interval) or in advance (at the beginning of your chosen interval). Finally, you can choose to have level payments (once set they will not increase throughout payment) or increasing payments, where the payments will increase annually. The increase can be a fixed amount (normally up to and including 10%), in line with inflation. Depending on the provider this could be the Retail Price Index (RPI) or Consumer Price Index (CPI)) or you could choose to have the increase capped at 5% (this is known as Limited Price Index).

Please note that if you choose an increasing income, the payments you receive will start at a lower amount than if you start with a level payment.

A Temporary Annuity: Pays an income in the same way as an Annuity, with the same choices and options, but is only payable for a fixed period. At the end of the fixed period (maturity) a guaranteed amount is available for you to re-invest either in to another temporary Annuity, a standard Annuity or an Income Drawdown plan.

Income Drawdown:  As an alternative to buying a secure income, you can normally withdraw a cash lump sum up to 25% of the value of your fund, free from income and capital gains tax, and an income directly from your plan any time after age 55. Income Drawdown may not be suitable for everyone. If, after choosing to take an income from your plan and you decide it is not for you and you would prefer a secure income, you can buy a secure income at any time.

The information given above is not a definitive description of the features of an Annuity or an Income Drawdown plan. You should always seek independent financial advice to ensure that this type of income option is right for your personal circumstances.

Please contact LR Connections on 0345 314 8972 for an appointment to discuss how we could help you.