What Is The Best Way To Draw Your Retirement Benefits?
Six Ways To Take Benefits From Your Pension Fund
1.
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.
2.
Get A Guaranteed Income
You use your fund to buy an Annuity. It’s an insurance policy that guarantees you an income. You can either select an annuity that pays out for the rest of your life, no matter how long you live, which could include an ongoing income for your spouse or partner. Or you could select a fixed term annuity that pays out a guaranteed income for a fixed number of years, and then returns your capital to your pension fund.
3.
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.
4.
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.
5.
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.
6.
Mix Your Pension Options
You can mix different options above to meet your needs.
There’s more detail on all of these options on MoneyHelper.
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 vs flexi-access drawdown: drawdown wins by a country mile
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.
Comparing Annuity, Drawdown And UFPLS
Popular Investments
If you’re looking to diversify your pension or other money beyond the stockmarket, or you want the best return on your deposit accounts with the highest level of consumer protection, here are popular investments chosen by SIPPclub Gold Members.
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