Your options at Retirement
Retirement should be a time we all look forward to and here in Pensions Trust, we'd like to make the transition as easy as possible for you. Unfortunately, it can be a lengthy process so the more notice of your retirement that you can give, the better.
How much pension could you receive?
The Financial Services Authority provide annuity tables so that you can see how much you can expect to receive as a pension from your Retirement Account.
What are your options at retirement?
We've also produced a booklet about Your Retirement Options to help you with selecting the right retirement product for you.
Need more information?
We have provided as much information as possible but if you can't find the information you're looking for, please get in touch.
What benefits are available on retirement?
How do you start to receive your pension?
What cash lump sum can you take at retirement?
How will your annuity be paid?
What benefits are payable in the event of your death in retirement?
Can your annuity be guaranteed to be paid for a certain period?
Does your annuity increase in payment?
What is the maximum amount of pension savings that can benefit from tax relief?
When can you retire?
Until 5 April 2010, you can retire from age 50 onwards. From 6 April 2010, the earliest retirement age will increase to 55.
What benefits are available on retirement?
Your total Retirement Account will be used to provide the following benefits on retirement:
• A pension payable to you for life; or
• A cash lump sum (currently tax-free) with a reduced pension.
The amount of your pension will depend on the value of your Retirement Account and the type of pension you choose when you retire. You will be able to select the benefits that are most suitable for you, including the level of increases to your pension in payment and whether you want to provide a pension for your spouse, civil partner or dependant(s) in the event of your death. All benefits are subject to any legislation or HMRC restrictions that are in force at the time of your retirement.
What cash lump sum can you take at retirement?
At retirement, you'll be able to take part of your Retirement Account as a cash lump sum which is currently tax-free. Under HMRC rules, the maximum amount of cash that can be taken is 25% of the value of your Retirement Account, including any ASCs/AVCs.
The opportunity to take a cash lump sum can only be taken at retirement; you can't surrender any of your pension for a lump sum once it is in payment.
If you would prefer, you can defer taking your ASC/AVC fund at retirement and take it later - at any time up to age 75. If you decide to defer your ASC/AVC fund, you'll be able to take 25% of the value as cash when you draw on that fund, subject to the maximum allowed under HMRC regulations.
If you decide to defer your ASC/AVC fund, it will need to be sufficient to cover the cost of the charges and the minimum amount that an insurance company will accept to provide an annuity, this will probably be in excess of £2,500. If your ASC/AVC fund is less than this, deferring may not be appropriate.
Any cash lump sum that you decide to take will be deducted from your Retirement Account and the remaining fund will be used to purchase an annuity.
How do you start your pension?
Once you have agreed your retirement with your line management and the Company, you should notify your Pensions Officer as soon as possible. A retirement pack will be sent to you providing a number of options for your annuity along with estimated amounts of pension (using an average annuity rate that can't be guaranteed) and the maximum tax-free cash.
Once you have received the estimates, you will need to complete two forms:
- a 'decision form' confirming that you are still planning to start your annuity and stating whether you would like to receive financial advice at your own expense; and
- a 'quotation option form' to indicate what type of annuity you require.
The Trustee has appointed an external annuity adviser and, on receipt of the completed forms and based on your requirements, the annuity adviser will search the markets for the best annuity rates available at the time, from a panel of approved providers. The adviser will send the details to your Pensions Officer who will then forward them to you.
The process for notification of retirement and obtaining quotations can take several months which may cause some delay in initially starting the payments; however, they will be backdated.
If you don't want to use the annuity adviser, you always have the option of purchasing an annuity on the open market.
How will your annuity be paid?
Your annuity will be paid in regular instalments and the timing of the payments will be agreed between you and the insurance company.
These annuity payments will be subject to income tax.
How are the charges paid?
Any charges incurred in setting up your annuity will be deducted from your Retirement Account.
What benefits are payable in the event of your death in retirement?
At retirement you'll have the option to purchase an annuity that includes a pension for your spouse/partner and any dependant(s), payable in the event of your death.
Can your annuity be guaranteed to be paid for a certain period?
Your annuity will be paid for your lifetime; however, you can also opt to buy a ‘pension guarantee’. Full details of the options available for a pension guarantee will be provided to you with any illustration sent to you as you approach retirement.
Does your annuity increase in payment?
You can choose whether your annuity is increased during payment and also, the rate of any increase. Full details will be provided at the time of your retirement.
What is the maximum amount of pension savings that can benefit from tax relief?
Since 6 April 2006, the maximum pension savings from all registered pension schemes that can benefit from tax relief under HMRC rules, are subject to a Standard Lifetime Allowance (SLA). For Defined Contribution schemes such as the M Plan, this is the value of your Retirement Account at retirement.
Benefits in excess of the SLA will be subject to a recovery tax charge that is currently 55% of the excess amount if the benefits are taken as a cash lump sum.
The amount of the SLA for each of the tax years until 2015/16 can be found here. You may have a higher personal Lifetime Allowance if you elected for Primary Protection under A-Day regulations and registered for this with HMRC. If you have elected Primary Protection, please submit your ‘Certificate for Primary Protection’ to Pension Services as soon as possible.
Last Updated: 29/03/2011
