LIFETIME ANNUITY | SCHEME PENSION | PHASED RETIREMENT | DRAWDOWN PENSION – CAPPED | DRAWDOWN PENSION – FLEXIBLE | THIRD WAY |
Regular and secure income for life | Regular and secure income for life | Part of your fund and part of your tax free cash are used in segments to provide income. | Tax free cash lump sum paid at outset and fund remains invested. Income can also be selected if required. | Tax free cash lump sum paid at outset and residual fund (subject to income tax) can be accessed immediately. | Tax free cash lump sum paid at outset and fund remains invested. Income can also be selected if required. |
Tax free cash provided at outset and fund used to purchase an annuity paid for life. | Tax free cash paid at outset and fund used to provide income for life. | The balance of the fund not used for income / tax free cash remains invested with a view to providing higher future benefits. | The balance of the fund not used for income remains invested with a view to providing higher future benefits. | Immediate access to the entire fund. | The balance of the fund not used for income remains invested with a view to providing higher future benefits |
Your annuity income is paid at least annually and can increase or remain level in payment. | Your annuity income is paid at least annually and can increase or remain level in payment. | Your starting annuity is smaller, but is supplemented by a portion of your tax-free cash sum. | You can choose the income you want, and when you want it, between nil and 120% of an equivalent single life annuity. | No maximum withdrawal. Must prove a ‘secured’ fixed pension income of at least £20,000 pa from other pension sources. | You can choose the income you want, and when you want it, in line with drawdown – some plans offer an income ‘lock in’ guarantee. |
Additional options can be selected at outset such as annual increases, spouse’s benefits or guarantees which reduce your own income. | Additional options may be offered at outset such as annual increases, spouse’s benefits or guarantees which reduce your own income. | Each year you decide how much fund to use for annuity purchase and how much tax free cash is used to supplement your income. | If investments do well, you may benefit from higher future income payments, and vice versa. | If the entire plan benefits have been taken, there is no further payment on death. | If investments do well, you may benefit from higher future income payments. Some plans offer an investment growth ‘lock in’ guarantee. |
Once you have bought your annuity, you usually cannot change your mind or change benefits. On death there may also be the option of a capital payment less tax. | Pension income paid directly by scheme. Once in payment you cannot change your mind or change the benefits. | Because you don’t commit all your funds to buy an annuity immediately, you keep your options open. | On death, the remaining fund is available to pay benefits to your family or dependants. | If the individual chose to access only some of the funds, remaining options on death (as under capped) remain an option. | On death, the remaining fund is available to pay benefits to your family or dependants, depending on plan type selected. |
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