ON RETIREMENT

At retirement, it is essential that you choose the most appropriate way in which to receive your pension income.

This can be by:

	Purchasing an annuity
	Phasing your income over a number of years
	Taking income drawdown

	Your health and that of any dependants
	The value of your pension fund
	The type of policy in which your pension was saved
	Any other income which may be available to supplement your pension, for example, investments.

To help you with your decision, we show below a brief description of the different plans.

Annuities
This is a guarantee provided by an insurance company that your pension fund will provide a specific income for the remainder of your life. It is possible for the annuity to pay a pension on your death to your spouse ranging from 50% to 100% of the pension you were receiving. It may be that your partner has also made provision for you in the same way and it is important to check if this is the case as this would affect your income in retirement if your partner were to die either before or during pensionable age.

The payment can be linked to the retail price index to ensure that your income rises each year in line with inflation, or increase annually at a fixed rate. Your annuity rate will vary according to your age when it is purchased, the type of plan which you choose and prevailing financial conditions at the time.

It is now possible to buy annuities that remain invested in the stock market. This means over the years the value of your fund and the pension which you receive could continue to rise. A word of warning is necessary as, of course, with any savings in the stock market, the value of your fund can also go down as well as up.

There are a variety of annuities available and to help you decide which is best for you and to ensure that you receive the most advantageous terms, contact Morgan Cameron ILP Ltd. for a quotation.

Phased Retirement
This is available when you have a number of personal pensions, or if your pension has been arranged into what are called "segments". It is possible to buy your annuity using one segment, while leaving the remaining segments invested for later years. Each segment can produce tax free cash as well as a pension. This means that you can adjust your income according to your financial requirements.

It may be that you intend working part-time or have sufficient savings for your early retirement years and are able to delay buying annuities for your remaining pensions until you are older, when you may receive a more advantageous rate.

At present, current legislation means that you must buy your annuity by your 75th birthday.

Income Drawdown
This type of contract allows you to delay buying an annuity until several years after retirement and in the meantime to draw income from your pension plan.

It has the advantage of providing you with flexibility and control over your pension, while receiving income from the plan.

It is only available with personal pensions.

How does it work?

At retirement your pension fund is transferred into an income drawdown plan.

You are able to take tax free cash and the remaining money is invested.

Withdrawals are taken each year to provide an income in retirement.

The amount of withdrawals can vary within limits calculated by the Government Actuary.

In any event, an annuity must be purchased by your 75th birthday.