You are entitled to access your pension benefits at age 55. There are some instances where you can access it earlier for example if you have a special occupation (footballer) or you suffer from ill health.

 

Taking benefits is known as a benefit crystallisation event (BCE). When a BCE occurs, the value crystallised must be measured for Lifetime Allowance purposes - the capital value of this amount depends on the type of event taking place.

 

Personal pension BCE's include:

• buying an annuity

• commencing pension drawdown

• reaching age 75 in drawdown pension and with uncrystallised benefits

• death

• taking pension-commencement lump sum (PCLS)

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Pensions now offer a variety of different options when one finds themselves retiring.

 

Let’s explore these:

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Option 1.  Leave your pension pot untouched for now and take money later or leave to beneficiary of your choice. Under new rules, when an individual under the age of 75 dies, their pension pot in most circumstances can be passed on to any beneficiary tax-free. The beneficiary will not have to pay income tax upon withdrawal of funds. If the individual dies after 75, it will be taxed at the beneficiary's marginal rate.

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Option 2. Get a guaranteed income (annuity). You can use all or part of your pension. If health is adverse you may wish to purchase an impaired/enhanced annuity. A short-term annuity can be purchased with a percentage of your pension pot (typically 5 years).

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Option 3. Take 25% tax free cash (Pension Commencement lump sum – PCLS) and leave the rest of the fund invested. Get an adjustable income which is referred to as Flexi Access Drawdown.

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Option 4. Take cash in chunks – Drawdown.

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Option 5. Cash in your whole pot in one go which is referred to as UFPLS (Uncrystallised Fund Pension Lump Sum).

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Option 6. Mix your options.