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Your options at retirement

What choices will I have when I retire?

It is important to note that the decision on how you want to take your pension benefits is made at your retirement and not when you start saving into your Personal Pension. Your personal circumstances, tax rules and pension legislation could change between now and your retirement date.

When can I start to take the benefits?
Personal Pension Plans are designed to provide you with a pension; however legislation states that you can start to take your benefits from age 50, and must start before age 75. The earlier you decide to take your benefits the smaller the pension will be.

What can I receive from the Pension Plan?

Under current legislation you have the following options when you decide to take the benefits:

  • You can take up to 30% of the fund as a tax-free cash lump sum
  • The remaining balance has to provide you with an income, which is subject to income tax

How will I take the income?

When benefits become payable, you will be offered a range of options regarding how the income can be taken. You can elect to purchase an “Annuity”, in which case the income will be guaranteed for life, or you can elect to keep the money invested and take an income from it – this is called “Programmed Withdrawals”.

If I choose an Annuity, what happens if I die?

At retirement you will be given many options with regards to how the income can be paid, including what would happen if you died whilst receiving the pension. A Single Annuity will stop when you die and no other income would be paid, whereas a Joint Annuity would continue to be paid to the surviving spouse. You will be able to choose how much of your pension you would like to continue to your spouse (e.g. all of it, or half of it). Depending on the age of your spouse a Joint Annuity may provide a lower income than a Single Annuity.

If I choose a Joint Life Annuity what happens when my spouse dies?

If you predecease your spouse then the pension becomes payable to the spouse, and will continue to be paid until they die. On their death the pension will then cease. However it may be possible to arrange for a lump sum to be payable to the estate. These and other options will be explained to clients at the time they want to take benefits.

Will my pension income increase once I start to receive it?

With an annuity you can choose to have an income which remains the same throughout your lifetime, or you can choose to have one which increases each year. A pension which increases each year is more expensive than one which remains the same and therefore your starting pension would be lower. Again these are decisions you take at retirement and not today.

What are “Programmed Withdrawals”?

When benefits are accessed from the Personal Pension Plan you can, rather than taking an annuity, choose to keep the money invested and take an income directly from the funds. This is called Programmed Withdrawals. The amount which can be taken as an income will be broadly equivalent to the income receivable from an Annuity. The advantage of this option is that the money remains invested and could grow to provide you with a larger pension. The disadvantages are that the fund might fall in value and leave you with a smaller pension, or the fund could even be depleted completely before you die, leaving you with no pension income.

How much will the income be?

The amount of income you will receive will depend on the size of your retirement fund, your age, the options you select (e.g. Joint Life Annuity) and annuity rates at that time. The more options you choose the lower your income will be. Your personal illustration provides you with an estimate of what the income could be.

What about tax?

Any statement about taxation is based on our understanding of current law and tax practice. Future changes in law and taxation,
or your own financial circumstances, could affect the treatment of this Plan and the amount of tax payable.
In order to ascertain your exact tax status, you should seek specific and professional tax advice in relation to your tax obligations under the MSV Personal Pension Plan.

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