How and When Pension Benefits Can Be Taken
The new pension rules brought in on 6 April 2006 have given pension holders a greater choice about how and when benefits can be taken. There are now four options:
- Buy an annuity (an investment that provides a regular income for life).
- Take a scheme pension - a secured pension for life paid out of the scheme assets.
- Draw an income directly from your pension fund from age 75, as an Alternatively Secured Pension (ASP)
- Draw an income directly from your pension fund before age 75, as an Unsecured Pension
It's important to remember however that the payment of all benefits is subject to individual scheme rules, so it's essential to check with your pension administrator to find out what your scheme allows.
Taking Semi-Retirement
If you're a member of an occupational pension scheme, the new rules mean that you don't have to leave your job to draw a pension. You may now choose to draw some (or all) of your pension whilst still working part- or full-time for the same employer (depending on your individual scheme rules).
Receiving a Lump Sum
The maximum tax-free lump sum that can be taken from your pension plan at retirement is now set at 25% of the value of your benefits, with a maximum of 25% of the Lifetime Allowance. However, tax-free lump sums are not available once you reach age 75. It's a good idea to check how much your pension scheme will allow to be withdrawn immediately on retirement.
