What will you do when you retire?Before April 2006, you had to buy an annuity once you reached age 75, but now there are fewer restrictions. Before you reach 75 you could opt for an unsecured pension, also known as ‘income drawdown’. This enables you to take a maximum of 120 per cent of the value of an annuity income. Or, you could leave it all invested if you don’t require the money at that particular point. You could also opt for ‘phased retirement’. Your pension policy is split into a number of segments. You open enough segments to draw enough ‘income’ for your needs during the year it is required. The ‘income’ is made up of a combination of the tax-free cash available for the segment and income from the remainder of the funds in the opened segment. The non-opened segments remain invested until you wish to draw another tranche of income. At age 75, you have to take your pension benefits but they can go into an ‘alternatively secured pension’. This is like an unsecured pension but the maximum you can take out is the equivalent of 90 per cent of an annuity income. With this option, when you die any remaining money goes towards a pension for your dependents rather than back into your estate. |
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