Retirement
Retirement Planning in Peterborough
Retirement Options
There are a number of options available to you when you come to take your retirement benefits. The main purpose of most pensions is to provide a regular income for life on retirement, however, a proportion of the pension fund can usually be used to provide a tax-free lump sum (known as a pension commencement lump sum).
There are a number of ways in which a pension can be used to provide a regular income, but the most common way is for the accumulated pension fund, less any tax-free lump sum taken, to be used to purchase an annuity from either the existing pension provider or another insurance company.
An annuity will provide you with a regular income for the rest of your life. As the existing provider may not offer the best rates, it is advisable to 'shop around' to see if another company will offer a higher income. This is known as the open market option.
There are a wide variety of different types of annuity available, including those that increase over time or which will continue to be paid to a husband, wife, civil partner or dependant on death of the annuitant (the person that purchased the annuity). It is not possible to cash in an annuity at any time.
As an alternative to purchasing an annuity it is also possible to receive an income directly from some pension plans, your financial adviser will be able to provide information about this option.
Depending on the type of pension, it is normally possible to take pension benefits from age 50, although this is due to increase to age 55 from 6 April 2010.
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AIA (Cambridge) Ltd offer professional, independent financial advice in Cambridge.