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February 2016 - The Clock is Ticking!
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Post Retirement Planning

You have worked for forty years or more and it is now time to decide how to spend your retirement years, but making sure you and your loved ones have enough money to do all the things you planned to do is an important and often complex process.

Annuities

As you retire and your pension matures, or if you have taken your pension benefits early you now have to decide how best to utilise your pension fund. One of the most popular methods is to opt for an Annuity.

An Annuity is similar to an insurance policy in that it provides a regular income in exchange for the proceeds of a maturing pension fund. You can take up to 25% of the pension fund in a tax-free lump sum, but the rest has to be converted into an annuity.

Annuities are often described as 'reverse life insurance', in that life insurance pays out IF you die and an Annuity pays out UNTIL you die. The amount the Annuity pays depends on the size of the pension fund and the amount of tax- free cash you take as well as your age, sex, health and the benefits you choose, such as whether the Annuity is solely for you or you and your partner.

There are a number of different variables associated with an Annuity and the achievable income levels and at Vintage Wealth we will give you the most appropriate advice dependent on your circumstances -

  • Are you looking for fixed income or income that rises each year?
  • Are you in ill health? There are alternative Annuity products that may be suitable
  • Do you want five or 10 year guarantees in place, meaning that if you die within that timeframe, your beneficiaries will continue to be paid an income

Unsecured Pensions

An Unsecured Pension is an alternative to Annuity purchase. After taking a tax-free lump sum, the remainder of your pension fund remains invested. The most common option is Income Withdrawal whereby you can take a taxable income (no minimum) within certain limits direct from your pension fund.

This route may be suitable for those with larger pension funds and who wish to retain control of the investment of their fund.

Phased Retirement

Phased Retirement' is a process of 'crystallising' your pension fund in stages, rather than securing your retirement income all at once. This method uses only a part of the accumulated pension fund each year, and in particular uses the tax-free cash amounts for income purposes. This means that, particularly in the early years, it is possible to create a highly tax efficient income stream.

As only part of the pension fund is being used for income purposes, the remaining fund continues to be invested and remains under pre-retirement rules for death benefits, which are more tax-efficient than post crystallisation rules.

Phased Retirement can be conducted through sophisticated encashment processes, or alternatively by simply breaking down the pension fund into a number of segments.

By the nature of the arrangement, a series of small income streams are established each year, which can be done through the purchase of an Annuity, (Lifetime Annuity, Investment Linked Annuity or Fixed Term Annuity) or the use of Capped Drawdown.

You can decide when you wish to phase in the value of your pension plan. Each element of phasing will provide the option of another tax-free cash lump sum, and will increase your pension income by the value of the Annuity or Capped Drawdown arranged.

This will continue until your entire pension fund has been crystallised.
You may continue to make contributions to your plan to build up future pension income during this period.

For more information about our range of post-retirement options and to speak to one of our advisers, please call 020 8371 3111 or email info@vintagewealth.co.uk

 

Vintage Wealth Management Limited is authorised and regulated by the Financial Conduct Authority. FCA Number 593380. Registered in England and Wales No. 07879453.
The Financial Ombudsman Service is available to sort out individual complaints that clients and financial services businesses aren't able to resolve themselves. To contact the Financial Ombudsman Service please visit www.financial-ombudsman.org.uk