Whether you are a salaried employee or you work for yourself, you’ll no doubt be aware of the need to be putting some of your salary into a pension fund. Depending on your company, there may be a company pension fund that you can pay contributions into.
However, if that is not an option you can have a personal pension plan or a Self-Invested Personal Pension – where it’s up to you to decide where your pension savings should be invested. With a SIPP you have a fund that you can pay into but not access until you are aged 55 or over. You can choose where to invest the money that is held within your SIPP and change this at any time.
Whatever pension fund you have been paying into, as you approach retirement, you need to decide how to access the pension savings you have accumulated over the years. Most people choose to buy an annuity with their pension savings – to provide them with a guaranteed income for the rest of their lives.
It is also possible to draw income directly from your pension fund, while leaving the rest invested, but the majority of people take the annuity option.
Either way, you can take up to 25% of your pension savings as a cash lump sum, tax-free, when you reach the age of retirement.
There is information on the different types of annuities at agepartnership.co.uk. It is worth shopping around to find the best annuity rates on the market – they change all the time, and the company that holds your pension savings may not necessarily offer you the best deal.
You’ll find some great annuities at Age Partnership, a company that specialises in financial services for the over 55s. There are many different options to consider when setting up an annuity such as how often you receive payments, whether it will be adjusted to reflect rises in inflation or fixed, and whether it is for you alone, or for you and a spouse to receive payments. You’ll find all the information you need on the Age Partnership website.