Withdrawing Savings from Your Pension
This is it. You have finally reached the end of the retirement planning journey or at least you thought you had. Recent legislative changes have vastly increased the number of ways in which you can withdraw your savings. These can broadly be summarised as follows:
- Purchasing an annuity – You hand the cash value of your savings to an insurance company. They contract to pay you a guaranteed income for life but you can never have access to your savings again. Your family may have the right of limited access in the event of your death dependent on how the annuity contract is structured.
- Drawdown – This option enables you to retain control of your money. Your money remains invested and you are able to withdraw an income directly from it. This option requires ongoing monitoring (in conjunction with your adviser) and periodic amendments in order to ensure it remains fit for purpose. This places you in a position to pass your entire fund to your beneficiaries in the event of your death.
- Phased Retirement – In summary, this is structured as a combination of option 1 and 2.
- Flexible Access – This is a recent innovation that enables you to withdraw the entirety of your pension fund as a lump sum. Whether this is the correct course of action for you personally is a very different issue. There are taxation consequences in addition to which it should always be borne in mind that a pension is intended to provide you with an income for the rest of your life. As with all options, it is imperative that you take independent financial advice.
- Uncrystallised Funds Lump Sum – This enables you to ad hoc lump withdrawals from your pension fund rather than taking it all out at the same time. The same considerations apply as they do for flexible access withdrawals.
It is better to have all of these options than not. Not so very long ago an annuity was just about the only option. Again, as long as you provide us with the information we need to advise you, we will methodically guide you towards the solution (or a combination thereof) that will work how you want it to and that feels comfortable.