Retirement Options

• Annutiy rates  are influenced by interest rates; if you buy an annuity now, while interest rates are low you will be locking into a relatively low annuity rate.   

• If the Government’s unprecedented borrowing triggers a period of high inflation; it would be bad planning to lock into low interest rates by buying an annuity now.

• Investment linked annuities offer the chance of a higher income in future –but only by taking extra risk. They may also have high charges.    

• Phased Retirement is usually only suitable if you have a fairly large pension fund (after taking any lump sum), or have other assets or income to live on.  

• Unsecured pensions involve extra costs and extra investment risk when compared with buying a lifetime annuity straight away. They are not usually suitable if you have a small pension fund (after taking any lump sum) or you have no other assets to fall back on.

A final salary (defined benefit) scheme

is effectively a promise from the employer to contribute enough money into the pension now and in the future to provide the promised pension at retirement.  The pension you will receive is normally based on your final pensionable salary and the number of years you have been a member of the scheme.

Money-purchase (defined-contribution) scheme  

the size of your pension fund depends on how much has been paid into the scheme and the investment returns it has earned. On retirement, part of your fund can normally be taken as a tax-free lump sum.

Personal Pensions, Stakeholder Pensions, SIPPs & AVCs

with a Personal Pension, Stakeholder plans, SIPPs & AVCs you (and sometimes your employer) contribute to your retirement fund. The contributions made; together with investment returns, will determine how large your fund becomes.  

You can take up to a quarter of your pension fund in cash, as a tax-free lump sum. The remaining fund must be used to provide you with an income, which is taxable. You can decide when to convert your “money purchase” pension fund you don’t have to stop working to do this.   

You cannot convert your pension savings before you are 50 (going up to 55 by 2010) and you must have converted them by your 75th birthday.