FLEXI ACCESS DRAWDOWN
- Can withdraw more than just the 25% tax-free lump sum – all of the fund if you wanted
- Complete flexibility in how much you draw out of your pension
- Attractive death benefits – before the age of 75 the full amount will be tax free
- Any amount taken out over the 25% tax free lump sum will be taxed at your marginal rate of income tax
- You run the risk of running out of money while in old age
- The income you receive from your pension will not be secure
if it is invested compared to an annuity
- Could potentially pay tax at 40% or 45% if you take out a large lump sum
- If you take any money from the un
ANNUITY
- Guaranteed income for life
- No investment risk
- Flexible options including spouse pension, guaranteed periods and rising income
- Potential for an enhanced annuity depending on health where this would pay a higher income due to the decrease in life expectancy
- May not get back what you paid
- Potential inflationary risk
- Currently locked in for life once you have purchased - though this could be changing
STATE PENSION DEFERRAL
- Every 9 Weeks you defer your state pension you will receive an additional 1% - this works out as an additional 5.8% per annum
- Will guarantee you a higher income for life than the standard state pension you would have received
- Potential to reduce the tax burden from any pensions freedoms if managed correctly
- The increase in future income could affect potential state benefits
- You may not receive more in income if you were to die prematurely
Small Pots and Trivial Commutation
- Enables you take 3 pension pots each being under the value of £10,000 as a lump sum without affecting your annual allowance
- Potential to defer the state pension and live off the fund value depending on your circumstances
- The minimum age for taking a small pension pot as a taxed lump sum will reduce from age 60 to age 55
- Tax will be paid on 75% of the pot values at your marginal rate of tax
- Potential to run out of money
Mixture
- Potential to reduce risk – investment, inflationary and premature death
- Potential to benefit from a more flexible approach to retirement with guaranteed minimum incomes
- You wont be tied into one way of producing your retirement income
- May not be suitable for everyone depending on his or her pot size.
- Still has an element of risk
