Following the Budget what options do I have?
Following changes announced in the 2014 budget there are a number of options available to you. Depending on your scheme type you may be able to draw the fund down as cash and pay a tax charge, buy a lifetime guaranteed income with an annuity, draw the fund down over a fixed period of time or look at flexible draw down options.
The government have launched the consumer website in response to the budget changes www.pensionwise.gov.uk
Will my pension provider offer me the highest income?
Not necessarily. It is always best to check the whole of the market as you are likely to find a higher income than that offered by your pension provider. This is because different providers offer increases in the rate available based on lifestyle, medical history, smoking history and postcodes etc. You have the right to exercise the ‘Open Market Option’ and arrange your annuity through the provider offering the highest income for you. *subject to the pension not having any attached Guaranteed Annuity Rates, Guaranteed Minimum Pension or being a Final Salary Scheme.
Who pays the tax due on the income I choose?
Any income from your fund, even if taken as cash, is treated as earned income and normal UK tax rules apply. Before making a decision to take the fund as tax it is worthwhile checking what tax position this will put you in and who would be responsible for making the payment. If a lifetime annuity or fixed term income is selected then the tax is deducted at source and any change in tax code is notified to the provider so they can adjust payments when necessary.
I have several plans, do I need to transfer them into one plan first if I want to have one income?
If you have more than one pension you wish to look at and have decided you wish to combine the funds and purchase one form of income with them, then at the time of purchase we are able to arrange for all of the funds to be transferred into the new provider and one income payment is then set up.
When can I take income from my pension plan?
You can normally access any plan once you have reached age 55. If you have a selected Nominated Retirement Date on your plan then we are able to find out if there is any penalty to take the fund earlier and if so what that would be.
How long does it take to arrange an annuity or fixed term plan?
This depends on which provider holds your pension fund and can take anything from one week to six weeks depending on their service levels. On average we would always suggest from point of application to receiving the tax free cash that four to six weeks is a reasonable time scale to expect.
Does the plan just stop if I pass away?
Not necessarily. You can look to add specific guarantee periods ensuring the funds are paid for a specific time period even if you have passed away, add a spouse so a proportion of income can be paid to them for the rest of their lifetime or look at adding Value Protection to a certain age. Our Retirement Consultants will go through these options with you and explain them in more detail when arranging any quotations.
I already have an annuity in payment, can I sell this or change it now it is set up?
The Government are still in consultation on a second hand market for annuities already in payment and at present it is not possible to do anything with a plan in payment. This is being reviewed in 2017. At present, once an annuity is set up and in force you cannot make any changes at a later date.
Why do you want to know about my lifestyle and medical history?
When a guaranteed lifetime annuity income is the preference, then each provider looks at your lifestyle and medical history differently. We run through a questionnaire which ensures that we can research the whole of the market and ensure that the maximum income available is achieved for you.
How much will it cost me?
The Open Market Option is available to everyone and there is no charge by your current provider to leave them or the new provider to set up your selected choice of income. The Retirement Desk is a non advised service which provides you with information about your options. All quotations are produced without charge or any obligation to use our service. If you decide to use our service to arrange the application and administration of your transfer, then we receive a one off commission from the chosen provider. The commission is always displayed on quotations and is taken into account when the provider calculates the product rate. We do receive preferential annuity rates from many providers.
I want to look at flexible drawdown and remain invested or really need advice can you help me?
The Retirement Desk consultant’s work purely on a non advised basis, however, when you want to look at products such as flexible drawdown or you wish to have advice then we can happily refer you to an Independent Financial Advisor. Alternatively you can look at www.unbiased.co.uk
What protection do I have if something happens to the annuity provider?
All of the providers are covered by the Financial Services Compensation Scheme. This means if anything were to happen to them and an alternative insurer didn’t take on their liabilities then the Financial Services Compensation Scheme would be relied upon. Annuities are classed as an insurance contract and the Scheme would cover 100% of the claim with no upper limit. The Insolvency Practitioner appointed would determine the value of your claim.