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At a glance

If you choose to transfer your pension account out of the Plan into a Drawdown arrangement, you’ll have:

  • An account – where your retirement savings remain invested, yet where you can access them when you need to.
  • Tax-free cash – the option to take up to 25% of your pension account as a tax-free cash lump sum at the point you retire or to take 25% of each withdrawal tax-free.
  • Withdrawals – the facility to withdraw cash as and when you require it throughout retirement (subject to tax).
  • Legacy options – the ability to pass on your Drawdown account to your dependants when you die.

Does this option meet your needs?

We don’t regularly think about the financial implications of getting older, such as the possibility of needing care or how long you’ll live for. But as you approach later life and need to make a decision about your retirement income, it is important to think ahead.

Only you know your financial circumstances – for example, whether loans or mortgages still need to be paid off and the sort of needs you may have later on. See the Retirement Living Standards which show you what life in retirement looks like at three different levels of income.

On average*, 65-year-olds in the UK live until they are:

Men: 84
Women: 86

*Office for National Statistics: National life tables - September 2018 (latest release)

Things to consider

Here are some things to help you consider which options will be right for you. The items highlighted in blue are the most relevant when considering withdrawing cash as and when you need to through Drawdown:

 

Tax

Tax-free cash lump sum

You can take some of your pension account as tax-free cash, usually:

  • Up to 25% of your total pension account when you initially move to Drawdown, or

  • Up to 25% of each withdrawal throughout your retirement.

Income (subject to tax)

  • Withdrawals above your tax-free cash allowance will be taxed at the highest rate of income tax that applies to you in the year in which you make the withdrawal (20%, 40% or 45%).

  • You won’t pay tax on investment returns within your Drawdown fund.

When should you take tax-free cash with Drawdown?

When you enter into a drawdown arrangement you have the option to either take a quarter (25%) of your benefits up front as a tax-free cash lump sum, or you can take a quarter (25%) of each withdrawal you make as tax-free. Whether you choose one way or the other will depend on your personal circumstances and tax position, so it’s worth speaking to an IFA for advice.

How do you move into Drawdown?

We don’t offer Drawdown directly through the Plan. So if you want to use Drawdown you will need to transfer into a pension arrangement which does offer this. The Trustee can put you in contact with a Drawdown provider to facilitate this option for you at retirement, it is called LifeSight. However, while the Trustee believes this should offer good value to many members, this arrangement will not be the most appropriate for everyone, and you are under no obligation to use this. It’s important to consider your personal circumstances before you make a decision. There are many different drawdown arrangements available. You can read more about drawdown arrangements on the MoneyHelper website.

Anouska's Choice

Anouska wanted flexibility to take her money a bit at a time, changing how much she took and when. After taking financial advice and confirming that this was the right thing to do, she transferred out of the Plan and took Drawdown.


Anouska’s choice is just an example and does not suggest a particular option that you should choose yourself. Please look at all of the options available to you and consider seeking regulated financial advice before making any decisions about your own benefits.

Your State Pension