Income in retirement
Annuities
Phased Retirement
Pension Fund Withdrawal
An overview of annuities, phased retirement and pension fund withdrawal
Annuities
An annuity is an income, usually for life, which is bought from an insurance company, usually with the proceeds of a pension fund . The fund may be used to buy an annuity at any time between the age of 50 and 75, but certainly before age 75. Annuity income may be paid either on a level basis or with a built in increase to take into account rises in the cost of living. Payments may be guaranteed for a certain period of time, ensuring a continuing income, during the guaranteed period, to the estate upon death. Provision may also be made for a lesser income to be paid to spouse or dependants upon death. 'Lifestyle' or 'impaired life' annuities may be offered to some people who have a reduced life expectancy due to ill health or habits such as smoking etc.
Phased Retirement
This is a flexible facility whereby the pension plan may be divided into segments which may be individually 'encashed' to provide a combination of tax-free cash lump sum and annuity at any time between ages 50 and 75. From age 75 the remaining fund must be used to buy an annuity.
Pension Fund Withdrawal
Often called 'pension drawdown' this enables the maximum tax-free cash lump sum to be taken at retirement but delays the purchase of an annuity. The residual fund will remain invested and produces income by way of encashing part of the fund subject to minimum and maximum limits set by the Government. From age 75 the remaining fund must be used to buy an annuity.