Retirement Income

What is Retirement Income?

Retirement Income or Pension Income refers to the income which can be drawn by a pension scheme member on retirement or by the member’s dependants on the member’s death.

What are the Retirement Income options?

Generally there are four retirement income options available to a member as follows:

·        Secured pension option: This includes the income provided by a Scheme Pension (either paid by an occupational pension scheme or a pension paid by an insurance company selected by the scheme administrator) or the income provided by a Lifetime Annuity (available to all defined contribution or money purchase schemes).

·        Unsecured pension option: This allows an income to be drawn from the scheme or a short term annuity taken up to the age of 75 years without the whole fund being used to purchase an annuity (available to all defined contribution or money purchase schemes but not defined benefit schemes).

·        Phased retirement option: This involves the taking of pension benefits at different times, either from segmenting a single policy or taking it from different policies.

·        Alternatively secured pension option: This option allows the continuation of income drawdown from the fund from the age of 75 years. An annual income between a prescribed minimum and maximum limits according to Government Actuary’s Department (GAD) rates must be taken. 

Why should I consider Retirement Income Options?

There will be reasons specific to an individual’s personal circumstances to which one Retirement Income option is more appropriate than another.

For instance, some Retirement Options such as Phased Retirement are currently not available to defined benefit schemes unless they transfer out to a scheme that does permit it. Also if the Income Drawdown option is taken by transferring from any employer sponsored scheme such as Final Salary the consequences of giving up scheme guarantees should only be considered in special circumstances, such as redundancy or early retirement.

There are several other issues relating to a clients death benefit requirements, access to tax free cash and income in the short term balanced against the income requirements in the longer term that also need to be considered.

How can I take a Retirement Income option?

The first and most important step after you have decided you may want to take retirement income or transfers to pension arrangements that allow the desired retirement income option to be taken is to have a discussion with us to provide you with independent financial advice.

Once we have agreed what the most suitable type of retirement income option is for your particular circumstances at the acceptable level of risk you are prepared to take to match your needs as part of the pension planning process.

We then make an application on your behalf to commence income withdrawals or transfer existing arrangements into an appropriate scheme based on how much income required, the size and composition of the fund and the benefits available from the scheme providing the retirement benefits including all other existing pension schemes or deferred schemes, and your personal tax situation.

Want to know more?

Talk to one of our qualified financial advisers on 01553 777600 or e-mail us at enquiries@ringassociates.co.uk

Also you may want to read the articles associated with Pensions and Retirement from the Financial Services Authority website at http://www.moneymadeclear.fsa.gov.uk/products/pensions/pensions.html and http://www.moneymadeclear.fsa.gov.uk/tools/stakeholder_pensions/notes_index.html

Also you can download the free booklet ‘Just the facts about pensions’ from the same website at

http://www.moneymadeclear.fsa.gov.uk/pdfs/pensions.pdf

Additionally you can download the booklet ‘Just the facts about retiring soon’ at http://www.moneymadeclear.fsa.gov.uk/pdfs/retiring_soon.pdf

and also the booklet ‘Just the facts about your retirement options’ at

http://www.moneymadeclear.fsa.gov.uk/pdfs/retirement_options.pdf

and the booklet ‘Just the facts about your retirement options – income withdrawal’ at

http://www.moneymadeclear.fsa.gov.uk/pdfs/income_withdrawal_ink.pdf