Your Choices in Retirement Planning

The first of these is whether to take some of the benefits as a cash sum, currently free of tax. Most people opt for this but if your plan has guaranteed pension rates for example, taking the full pension with no cash might be the best choice. Either way you need to find out first.

The next major decision is whether to take the final and irreversible step of buying an annuity (or pension) for life, or whether some other method of taking your benefits might be more suitable. Since 1978 people have been able to choose who to buy their pension from at retirement (called the Open Market Option) .

The Traditional Annuity offers the highest level of security and its costs are relatively low and your future income is known and agreed at the beginning. For many people, especially those with smaller pension funds, this is still likely to be the first choice. It does however have certain limitations. The most important being that once you have bought a traditional lifetime annuity, you cannot change it even if your own circumstances change. If you think a traditional annuity is for you, then it makes sense to at least find out which company will give you the most pension for your money. Click here if you are interested in finding the biggest pension.

The Finance act of 1995 saw the introduction of a new extra dimension in choice. This was the start of Income Drawdown. Instead of swapping your pension fund for an agreed level of income for the rest of your life (the traditional annuity), you could leave the pension funds invested and withdraw some of the money each year in the form of a variable taxable income. Further big changes were made in April 2006, with new names such as Unsecured Pensions and Alternative Secured Pensions. These plans offer much greater flexibility and give you more control over your pension, but they may also carry greater costs and indeed greater risks as your money would still be invested.

There are now plans that offer a combination of the above and also ones where your income is supplied by the form of a traditional annuity for a fixed number of years that can then be changed. Click here for more information on Flexible Retirement.

It is a very complicated area and one that needs to be tailored to your individual needs and circumstances, so talking to an Independent Financial Adviser who specialises in pensions is important. At Ashwood Law our advisers have been specially trained to help you through all the options for your retirement.

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