What Is The Best Way To Draw Your Retirement Benefits?

What Is The Best Way To Draw Your Retirement Benefits?
Underwater by Andy Deitsch. Why?

As there are six different ways to draw tax free cash and taxable income from your pension fund, whether you're working or retired, it'll pay you to check them out now

Get To Grips With Annuities, Flexi-Access Drawdown And UFPLS (Whatever That Is!)

Six Ways To Take Benefits From Your Pension Fund


Leave Your Whole Pension Fund Untouched

You don’t have to start taking money from your fund when you reach your ‘selected retirement age’.  You can access it from age 55.  Or you can leave your money invested until you need it.


Get A Guaranteed Income

You use your fund to buy an Annuity.  It’s an insurance policy that guarantees you an income for the rest of your life, no matter how long you live.


Get An Adjustable Income

Known as Flexi-Access Drawdown, your fund is invested to give you a regular income.  You decide how much to take out and when, and how long you want it to last.


Take Cash In Chunks

You can take sums of money from your fund until it runs out.  Known as Uncrystallised Funds Pension Lump Sum (UFPLS), your 25 per cent tax free amount isn’t paid in one lump sum.  Instead, you receive it over time.


Take Your Whole Fund In One Go

It’s effectively the same as option 4 above, except you take your entire fund in one go.  25 per cent is tax free, and the rest is taxable.


Mix Your Pension Options

You can mix different options above to meet your needs.

There’s more detail on all of these options on Pensionwise.

What The Experts Think About Drawdown And UFPLS

With Annuity rates so low, the majority of people select Flexi-Access Drawdown and UFPLS.  So here’s three interesting takes on which one might work best for you.

Why You Shouldn't Take A Lump Sum From Your Pension

UFPLS Versus Flexi-Access Drawdown Is A No Brainer

Unpicking the Uncrystallised Funds Pension Lump Sum (UFPLS)

SIPP and SSAS Charges Can Affect Your Decision

Many SIPP and SSAS providers charge each time you take one-off payments from your pension.  Typically, it can cost between £100 and £250 per event.  If you’re taking UFPLS, it could add up to a lot of fees.

One of the cheapest SIPP providers is AJ Bell.  If you’re sticking to stockmarket assets in your SIPP, you’ll pay just £100 per year no matter how many withdrawals you make (at February 2018, plus VAT).

Comparing Annuity, Drawdown And UFPLS

annuity drawdown ufpls

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AJ Bell Is Often The Best Value SIPP For Stockmarket Assets

That's our opinion.  Not just because AJ Bell was the first company to offer an online SIPP.  Nor that it's received many prestigious awards.  And not even because the wife of SIPPclub's Founder has an AJ Bell SIPP.  It's because it's one of the most competitive stockmarket SIPPs on the market. 

Over time, charges can wipe out a huge part of your fund.  We like AJ Bell because there are no set-up costs.  If you hold passive funds, which is our preference, or shares, investment trusts, EFTs, gilts or bonds, you pay one small fixed fee no matter how large your fund.  And when you come to draw your benefits either as occasional drawdown or UFPLS payments, there's a small charge for the whole year no matter how many times you access your money (many SIPP and SSAS providers charge more than this for each payment).  However, you should always compare charges in detail, because AJ Bell could be more expensive than other providers, depending on the type of stockmarket assets you hold.

Visit AJ Bell

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