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retirement options.

Our range of self-invested schemes offer members a wide choice payment options for their benefits, so they can phase their retirement income, to suit their circumstances.

Members can to take their benefits at any time from age 55, although in the case of serious ill health it may be possible to take benefits earlier.

It is important for members seek professional advice before taking benefits, as the choices they make will affect both their retirement income and the level of contributions they can make to a pension scheme in the future. Taking all or part of a fund to provide benefits is called crystallisation.

A member does not have to retire or stop work in order to take benefits from their scheme. Benefits can also be taken in stages, rather than as a single lump sum.

Lifetime allowance

When a member takes benefits from their scheme, and again at age 75, the total value of their funds along with any other arrangements held will be tested against the current lifetime allowance. If the lifetime allowance is exceeded, an additional tax charge will apply unless the member has obtained pension protection.


Retirement options

Upon retirement, benefits can be taken as follows:

Uncrystallised pension lump sum

To crystallise all, or part of a member’s funds for immediate payment is known as an uncrystallised funds pension lump sum. This differs from flexi-access drawdown because the total fund crystallised is taken in the one go. Twenty five percent is paid tax-free, with the rest treated as earned income and liable to income tax.

A money purchase annual allowance test is triggered when benefits are taken in this way. An uncrystallised funds pension lump sum is not available to members with tax-free lump sum protection, or rights to a lump sum of more or less than exactly 25%.

Pension commencement lump sum

Normally, the maximum tax-free lump sum that can be taken is 25% of the crystallised fund used to provide pension benefits, up to the lifetime allowance. Therefore, the maximum tax-free lump sum is:

Tax YearsMaximum Tax-free Lump Sum

Individual members may be entitled to more than this if they have lump sum protection, fixed protection or individual protection. A financial adviser can explain this further.

Any pension taken from a member’s crystallised fund will be treated as earned income and is therefore liable to income tax.

Flexi-access drawdown

Members may draw an income using flexi-access drawdown. There is no restriction on the amount a member can take or the payment frequency. A money purchase annual allowance test is triggered following receipt of income from flexi-access drawdown.

Scheme pension

A Rowanmoor SSAS, SIPP or Family Pension Trust offers members the opportunity to take benefits as a scheme pension. This is a secured income paid to the member for life. Unlike income drawdown, a scheme pension can provide a guaranteed income.

A scheme pension allows a member to receive income direct from their Family Pension Trust, which provides the member with a set level of pension for their fund. The level of pension is calculated by Rowanmoor’s actuarial team and is designed to pay out over the member’s expected lifetime. The amount of scheme pension payable is normally reviewed every three years and may vary, depending on the performance of the scheme investments.

If a member’s life expectancy changes, for example due to ill health, the actuary can review the payment of the scheme pension to reflect any decrease in life expectancy.

We recommend members seek financial advice from a suitably qualified adviser before proceeding with this method of taking benefits.

Lifetime annuity

A lifetime annuity is purchased from a life assurance company. The annuity must be payable up to the member’s death or the end of any guarantee period should the member die within the period.

The annuity may be level or incorporate annual increases. It may also allow for pensions to be paid to dependant’s after the death of the annuitant.

Short-term annuity

A short-term annuity is purchased from a life assurance company and is payable for a term of no more than five years.

Capped drawdown

Up to 5 April 2015, income could be taken from a pension fund as capped drawdown. Under capped drawdown, pension payments are limited and must be regularly reviewed to ensure they do not exceed the permitted maximum. If a member is already taking capped drawdown income they can continue to do so. Alternatively, members can convert capped drawdown funds into flexi-access drawdown, which means their income will not be subject to the capped limits and review requirements, although a money purchase annual allowance test will be triggered.

If you have any specific questions, please contact us. Alternatively visit our literature library for more information.