Transferring out
Thinking about transferring your pension out of the Scheme? If so, there are lots of things to consider. Your DB pension is a valuable benefit and transferring out may not be the right choice for you, so it’s important to review your options carefully.
Remember, transferring out of the Scheme is an irreversible decision and, if you’re planning to transfer £30,000 or more, it’s a legal requirement that you consult with an independent financial adviser (IFA).
If you do choose to transfer out, you may have access to some of the options below:
Annuity
If you’d like a regular, guaranteed income for the rest of your life, you can purchase an annuity with all or part of your savings. There are lots of annuity options to consider. You can buy one for just yourself, or for you and a spouse, and you can also choose how your pension will increase throughout your retirement. The cost of the annuity will vary depending on the choices you make about the kind of annuity you buy.
Drawdown
If you’d prefer to leave your savings invested for as long as possible, you could opt for the ‘drawdown’ approach. With this option, you draw money down from your account as and when you need to (within applicable limits) while the rest of your savings stay invested. This option is designed to provide you with a flexible taxable income.
Cash lump sum
If you’d like to take some or all of your account balance as cash and manage this money yourself, you can. However, it’s important to remember that your savings will have to last you for your entire retirement. There are also tax implications to consider – up to 25% can be taken tax free, but the rest is taxed as income (taking a large cash lump sum may push you into a higher tax bracket).
Often, people take part of their savings as one cash lump sum and buy an annuity or drawdown with the rest. However, you could also opt to take up to five lump sums over a longer period of time (only the first 25% of each sum can be taken tax free).
Remember, you don’t have to choose one option when deciding how to access your pension. Depending on your circumstances, you can mix and match as you like, taking cash and income at different times to suit your needs.
Need help deciding?
Neither the Trustees nor Fidelity can give you financial advice. If you need further guidance when thinking about your options, you can consult with an IFA. To find an IFA in your area, visit unbiased.co.uk or consult Wren Sterling (the Trustee’s appointed IFA).
Getting advice before transferring out of the Scheme is particularly important and is normally a legal requirement.