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Retirement options FAQs

Select a question from one of the lists below to view the answer.

General questions

The questions below apply to you regardless of how you decide to take your pension savings. Remember, tax rules and legislation can change and the value of any tax benefits will depend on your individual circumstances.

 What happens if I die before I start taking my pension savings?

Your plan can provide support to your chosen beneficiary in the following ways:

  • The value of your plan will normally be paid as a tax-free lump sum.
  • If your employer has added extra life assurance to your plan, the appropriate amount will be paid out as well.
  • Depending on the scheme rules death benefits can be paid as an income.

If you’ve not chosen beneficiaries or would like to change your beneficiary details, you can complete the form online or download and print a paper form.

What happens when I want to start taking my pension savings?

We'll be in regular contact with you from your 50th birthday and will send you information about the retirement options available to you.

 Can I take my pension savings early?

You can normally start taking your pension savings any time after age 55 - even if you're still working.

It may be possible for you to start taking your pension savings before age 55 if your health means you can no longer carry out your job.

Secure income

Buy a guaranteed income, sometimes called an annuity, to provide an income for the rest of your life.

 How does it work?

You’ll use your pension savings to buy a guaranteed regular income. This is also known as an ‘annuity'.

You give some or all of your pension savings to an insurance company, and in return they'll pay you a guaranteed, regular income for the rest of your life.

How much income you can expect will depend on things such as the money you’ve saved, your age and health when you retire and any extra features you choose to add - see below for details.

If you choose to buy an annuity, you can't change your mind later.

 What are my options?

With a secure income, you can choose features that will offer some extra protection to you and your loved ones.

Take care of your loved ones
You can pass on a portion of your pension income to your spouse, civil partner or other dependant(s) should they live longer than you do.

Keep pace with inflation
You can arrange for your pension income to increase each year. This can help protect the buying power of your money as prices go up over time.

Extend your income beyond death 
By adding a ‘guarantee period’, your income payments will continue for a set period of time - even if you die before then. 
Be honest about your health 
You could get a higher regular income if you have any health issues or habits that could shorten your life expectancy. This is called an ‘enhanced annuity’. 
So if you're talking to a provider about buying a secure income, be open and honest about your health. You should [also shop around to find the best deal

Extend your income beyond death
By adding a ‘guarantee period’, your income payments will continue for a set period of time - even if you die before then.

It's likely any extra features you choose to add will reduce the starting level of your pension income. 

 Remember - you can shop around

When you come to buy a secure income, you’re free to shop around. That means you don’t need to stay with the pension provider you’ve been saving with – you can see who can best meet your needs.

 What else should I think about?

Tax-free cash
You can usually take up to 25% of your pension savings as a tax-free lump sum. Any cash you take will leave you less money to buy your secure income.

Decide how often you want your money
When you’re buying a secure income, you can tell your provider how often you'd like to be paid. This could range from once a month to once a year.

Get a bigger income depending on your health and lifestyle choices
You may be offered a higher level of income if you have any health issues or lifestyle choices which could shorten your life expectancy. This is called an 'enhanced annuity' So if you're talking to a provider about buying a secure income, be open and honest about your health. You should also shop around to find the best deal.

 How will my income be taxed?

Your regular income will be treated as taxable. HM Revenue and Customs (HMRC) will calculate the tax you need to pay and tell your chosen pension provider how much to take off before anything is paid to you. To find out more about how much tax you may need to pay, visit royallondon.com/taxinretirement.

 What happens when I die?

Unless you’ve chosen to pass on some of your income to your loved ones or set a ‘guarantee period’, your pension payments will stop when you die.

 What do I need to watch out for?

As with all retirement options, there are some potential hazards you’ll need to watch out for.  

If you’re thinking of buying a secure income in particular, here are some other things to think about: 

You can't change your mind
Once you’ve bought a secure income, you can’t usually change your mind - even if your circumstances change. 

Adding extra features will lower your income
If you want to add any extra features, such as making sure your loved ones will get some of your income when you die, you should expect to be paid a smaller income.

Flexible access

You can keep your pension savings invested, while you take the money you need whenever you need it.

 How does it work?

You’ll keep your pension savings invested but move them into a plan that lets you gradually take money out.

This is also called ‘income drawdown’. We currently offer this through our Pension Portfolio product with income release facility.

You can set up regular income payments which you can stop and start at any time. You can also take more money when you need it and less when you don't.

 Remember - you can shop around

When you come to take your pension savings, you’re free to shop around. That means you don’t need to stay with the pension provider you’ve been saving with – you can see who can best meet your needs.

 What are my options?

With flexible access, you’re in complete control. Take a regular income or dip in and out whenever you like.

Take some tax-free cash
You can usually take up to 25% of your pension savings as a tax-free lump sum. Any cash you take will leave you less money for your ongoing income

Keep your options open
If you’re ever worried about running out of money, you’ll always have the option to buy a secure income with the pension savings you have left.

Take a taxable cash withdrawal 
If you ever need access to a cash lump sum, you can take it from your savings. Unlike your tax-free cash entitlement, this type of payment would be taxable.

Continue saving towards your future
You can keep putting money into your plan - and benefit from tax relief on your contributions. Of course, tax rules can always change - and how much tax relief you'll benefit from will depend on your individual circumstances.

When you access your retirement savings flexibly and take more than the 25% tax-free allowance, it's likely you'll trigger something called the money purchase annual allowance (MPAA). This is essentially a limit on how much you're allowed to continue saving towards your retirement into a pension before a tax charge applies.

Find out more about the MPAA and how it works.

 How will my income be taxed?

Your income payments will be treated as taxable. HMRC will calculate the tax you need to pay and tell your chosen pension provider how much to take off before anything is paid to you.

To find out more about how much tax you may need to pay, visit royallondon.com/taxinretirement.

 What happens when I die?

If you have pension savings left when you die, they can be passed on to your loved ones - usually free from inheritance tax. Tax treatment depends on the individual circumstanges of the person receiving the payment(s).

  • If you die before age 75, your pension savings can normally be paid to your loved ones however they like, income tax free. 
  • If you die aged 75 or older, your pension savings can be paid to your loved ones however they like, subject to income tax. 

 What else do I need to think about?

As with all retirement options, there are some potential hazards you’ll need to watch out for. 

If you’re thinking of using flexible access in particular, here are some other things to think about: 

You're still exposed to investment risk
While your money stays invested, there are no guarantees it will grow. Indeed, if your investments perform poorly, you could get back less than you started with. 

You could run out of money before you die
With flexible access, your income isn’t guaranteed to last forever. As your savings stay invested there's a risk your money could run out if your investments perform poorly, if you take too much money out of your plan or if you live longer than expected. 

You’ll need to actively review your plan
To help make sure your savings last as long as you need them, you'll need to regularly review the income you're taking along with how your investments are performing. 

Saving into other pension plans could be restricted
When you access your pension savings flexibly and take more than the 25% tax-free allowance, you'll face greater restrictions on how much you can save into a pension towards your retirement before a tax charge applies. This is called the money purchase annual allowance (MPAA).

Find out more about the MPAA and how it works.

Cash lump sum

You can take a cash payment from your pension savings however you like – take a little or take the lot, it’s entirely up to you.

 How does it work?

You can choose to take some or all of your pension savings as a cash lump sum. Usually, the first 25% of any cash payment will be tax-free and the remaining 75% is taxable.

If you were entitled to more than a quarter of the value tax-free as at 6 April 2006 you can keep this entitlement, but only if you take all your pension savings at the same time.

You should speak to a financial adviser for more information on taking a cash lump sum. If you don’t already have a financial adviser, you can find one in your area by visiting royallondon.com/find-a-financial-adviser. Advisers may charge for their services - though they should agree any fees with you upfront.

 What are my options?

If you choose to leave some of your savings behind, they'll remain invested in your plan.

Keep your options open
You’ll always have the option to buy a secure income with the pension savings you have left in your plan. How much income you can buy will of course be affected by the levels of cash you've taken out.

Continue saving towards your future
You can keep putting money into your plan - and benefit from tax relief on your contributions. Of course, tax rules can always change - and how much tax relief you'll benefit from will depend on your individual circumstances.

When you access your pension savings flexibly and take more than the 25% tax-free allowance, you could trigger something called the money purchase annual allowance (MPAA). This is essentially a limit on how much you're allowed to continue saving towards your retirement into a pension before a tax charge applies. 

Find out more about the MPAA and how it works.

Cash in any ‘small pots’
If you have £10,000 or less saved in your plan, it would be classed by HMRC as a ‘small pot’.

You can usually cash in up to three pension plans as a small pot without triggering the MPAA.

 How will my income be taxed?

The first 25% of each cash payment will be paid tax-free and the remaining 75% is taxable. 

If we don't have an up-to-date tax code for you, we may need to initially take off too much (or too little) tax from your cash payment. You'll need to reclaim - or pay the difference - directly with HMRC. 

To find out more about how much tax you may need to pay, visit royallondon.com/taxinretirement.

 What happens when I die?

If you have pension savings left when you die, they can be passed on to your loved ones - usually free from inheritance tax. Tax treatment depends on the individual circumstances of the person receiving the payment(s).

  • If you die before age 75, your pension savings can normally be paid to your loved ones however they like, income tax free. 
  • If you die aged 75 or older, your pension savings can be paid to your loved ones however they like, subject to income tax.

 What do I need to watch out for?

As with all retirement options, there are some potential hazards you’ll need to watch out for.

If you’re thinking of taking a cash payment in particular, here are some other things to think about: 

You may need to pay considerably more in tax
Taking large sums of money from your pension savings could push you into a higher rate tax bracket. This means you'd need to hand more of your savings to the government as income tax. 

You could run out of money before you die
With cash payments, your money isn’t guaranteed to last forever. So you'll need to think really carefully about how long you need it to last. 

You could still be exposed to investment risk
When you leave money in your plan, there are no guarantees it will grow. Indeed, if your investments perform poorly, you could get back less than you started with. 

You can't change your mind
Once you’ve fully cashed in your plan, you can’t usually change your mind - even if your circumstances change. 

Saving into other pension plans could be restricted
When you access your pension savings and take more than the 25% tax-free allowance, you'll face greater restrictions on how much you can save into a pension towards your retirement before a tax charge applies.This is called the money purchase annual allowance (MPAA).

Find out more about the MPAA and how it works.

Leave things for now

If you reach age 55 and don’t want to access your pension savings yet, that’s absolutely fine.

 How does it work?

You can leave all your pension savings exactly where they are until you decide to take them.

 What are my options?

If you choose to leave some of your savings behind, they'll remain invested in your plan.

Decide when you're ready
If you're aged 55, you can access your pension savings whenever you want to. You can buy a secure income, dip in with flexible access or take it all as a cash payment. You'll find more detail on each of these options throughout this website.

Continue saving towards your future
You can keep putting money into your plan and benefit from tax relief on your contributions. Of course, tax rules can always change - and how much tax relief you'll benefit from depends on your individual circumstances.

Give your savings more opportunity to grow
As your money remains invested for longer, your savings can continue to grow. It also means they can fall in value, so you could end up with less money to live on.

 What happens when I die?

If you have pension savings left when you die they can be passed on to your loved ones - usually free from inheritance tax. Tax treatment depends on the individual circumstances of the person receiving the payment(s).

  • If you die before age 75, your pension savings can normally be paid to your loved ones however they like, income tax free.
  • If you die aged 75 or older, your pension savings can be paid to your loved ones however they like, subject to income tax.

 What do I need to watch out for?

As with all retirement options, there are some potential hazards you’ll need to watch out for. 

If you’re thinking of leaving things for now, here are some other things to think about:  

You're still exposed to investment risk
While your money stays invested, there are no guarantees it will grow. Indeed, if your investments perform poorly, you could get back less than you started with.

Your options could become restricted
Depending on the type of plan you have, your retirement options may become limited when you reach a certain age. That means it’s important to review your plan details regularly to see if any restrictions apply.

Keep us up-to-date

Keep us up-to-date with any changes that could affect your retirement plans.

If you decide to change your retirement age, let us know. If you're invested in a Lifestyle Strategy, we'll make sure your money is invested in the right part of the strategy.

Did you know?

If you die before you take any or all of your pension savings, your savings could be paid to one or more beneficiaries of your choice. If you've not chosen beneficiaries or would like to change your beneficiary details you can complete the form online or download and print a paper form.

Know your limits

The government has set limits to do with pension contributions and taking your pension savings.

Find out more

Remember

Tax rules depend on individual circumstances and could change.

Contact us

Email us

0370 850 1991