From the age of 55 you can elect to draw pension benefits from your defined contribution pensions (not final salary). Up to 25% of this can be paid tax-free with the residual balance to be paid as a pension income subject to your marginal rate of Income Tax. In most circumstances, the pension income will either be provided via the purchase of an annuity or via the use of Drawdown (Unsecured Pension).
Annuities represent a ‘simple’ retirement choice. Having elected whether or not to take your tax free lump sum, the residual value of your benefits is paid to an annuity provider who will guarantee you an income for your lifetime. This income is still subject to your marginal rate of income tax.
Once an annuity has begun, it cannot be altered and so it is important that you consider all the options available to you before you make the final purchase.
To discuss this further, please contact us.