My retirement options – DC Section
Your DC retirement options
You have a number of options available to you when taking your DC pension. These are as follows:
Option 1 – Purchasing an annuity
You can use your Account to purchase what is known as an ‘annuity’ from a financial institution (such as an insurance company).
Option 2 – Receiving a Tax-Free Lump Sum
You may be able to take part of your pension as a tax-free lump sum but it must be linked to a pension. There are limits on the amount of tax-free cash you can have. When you reach retirement age, the Administrator will provide you with an illustration of the maximum tax-free cash that you may be able to take.
Option 3 - Taking all of your pension savings as a one-off lump sum
This option is called an UFPLS – uncrystallised funded pension lump sum but basically means taking the whole Pension Account as a cash sum. You also have the option of taking all of your savings as a one-off lump sum. In general, currently 25% of the lump sum will be tax-free with the remainder paid through PAYE payroll and subject to income tax at your marginal rate.
Option 4 - Using your pension savings to provide two lump sum payments (two UFPLS)
You also have the option under the Plan to use your pension savings to take the Pension Account as to lump sum payments paid in two consecutive tax years. Under this option, you can choose to take one lump sum in any given tax year, with the remaining fund taken as a lump sum payment in the following tax year. In general, 25% of each lump sum taken will be tax-free with the remainder paid through payroll and subject to income tax at your marginal rate.
Option 5 – Use income drawdown
Like many occupational pension plans, the Plan doesn’t offer income drawdown. So, if you want to take your pension pot in this way you will need to transfer to another pension arrangement that offers this option. You can transfer to any income drawdown provider of your choosing, but the Trustee has agreed a special arrangement with the L&G Worksave Mastertrust (Legal & General - Legal & General Mastertrust Scheme Illustration Request (legalandgeneral.com), which is only open to members of the Plan and gives you an extra option which wouldn’t otherwise be available to you under the Plan.
Option 6 - Transfer your pension to another arrangement
You also have the option of transferring your benefits to another pension arrangement. You’ll need to consider this option carefully and ensure the Scheme you're transferring to will provide you with the benefits that are right for you.
Financial advice and guidance
Whichever option you’re interested in, we recommend that you discuss this with a financial adviser. You will have a one off opportunity to discuss your retirement options with Workplace Solutions Advisory Ltd (WPSA). More information will be provided by Buck at the time of your retirement. You can also visit the Financial Advice section of the website for more information.
Additionally, we also recommend you seek guidance from Pension Wise.
You can contact Pension Wise by ringing 0800 280 8880 or 0800 138 3944 and making an appointment. Phone appointments are with MoneyHelper and face-to-face appointments generally take place at branches of the Citizens Advice services, although you should be aware that face-to-face appointments are not currently available. Visit the Pension Wise website at https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise for more details.
Please note that if you should decide to request payment of your DC pension savings, you must either attend a guidance session with Pension Wise or formally opt out of doing so. When we provide you with your retirement quotation pack, this will include a letter with more details about this and that we can help by making an appointment for you.