phased retirement
This option would mean transferring into a phased personal
pension scheme. The pension plan is set up with many segments and you could
select to open some segments (taking tax-free cash and annuity) or none of
the segments. Any unopened segments would continue to grow in a tax beneficial
environment until you wanted to open them. "Income" is derived from
the annuity income and the tax-free cash taken and is built up gradually as
more segments are opened.
Advantages
- Greater flexibility - you choose when to open the segments and how many
to open.
- Unopened segments continue to grow in tax friendly environment.
- Investment control - continuing investment control available on the unopened
segments.
- On death before annuity purchase, unopened segments can be paid out to
chosen beneficiaries tax-free. Widows/dependants pension is available on
opened segments.
Disadvantages
- This is a complex arrangement which needs continual monitoring in terms
of opening segments, investment decisions, and tax implications.
- Eventual income will be dependent on investment returns during the plan
and on the annuity rates at retirement.
- Since your tax-free cash makes up some of your "income" each
year, there won't be a large tax-free cash fund available.
- Charges could be higher than with stakeholder or annuity purchase.
