The government has given pension scheme members complete flexibility in the way they can take their money. Different pension schemes offer different options and you can transfer your pot to one or more different pension providers to take advantage of these flexibilities.
Decisions taken at retirement are vitally important and could have potentially far-reaching effects. Pension Wise is the Government's pension guidance service, and provides a free impartial service to help you understand your options at retirement. It's available at www.pensionwise.gov.uk, by calling 0800 138 3944, or face to face.
Below we set out the options at retirement offered by BCF. Please note that the different options have different features, different rates of payment, different changes and different tax implications.
Take a cash lump sum from your pot
You can usually take up to 25% of your retirement fund as a tax-free lump sum, with the balance being used to provide you with a taxable retirement income.
Get a retirement income
Whether or not you choose to take some of your pension pot as a lump sum, the funds left in your pot will remain invested and can be taken as a taxable income. You have freedom to choose when and how frequently you take your income, and what level of income you will take. This is known as a flexi-access drawdown pension.
Take all your pot as cash
You can take the whole of your fund as a cash lump sum if you wish. One quarter of the cash would be tax-free and the rest would be taxed as income. You should consider the tax consequences of this option, and may wish to consult your accountant or tax adviser.
Turning your pot into a guaranteed income
Some people choose to convert their pot into a guaranteed retirement income when they retire. This is known as buying an Annuity. It means that you use your pot to buy you an income which is paid to you for the rest of your life. If you wish to buy an annuity with your BCF pension pot you may do so under the Open Market Option. Your retirement income is paid by an external provider, and you can choose to go to another company if you prefer.
Take a series of cash lump sums
You may take a series of lump sums, with 25% of each withdrawal tax free, and the other 75% taxed as income. This may help to manage the amount of tax you are liable to pay.
For a short video on the flexibilities at retirement click here