In brief
Take tax-free cash and income from your pension fund bit by bit and benefit from any stock market rises or investment growth.
Phased retirement is almost like a number of mini-retirements spread out over a period of time to suit your individual needs. With this type of pension, your retirement fund is divided into several individual segments, which we invest in your chosen funds. You can then cash in one or more of these segments whenever you want, giving you a portion of tax-free cash (usually 25% of the value of the segments you're cashing in) and the remainder that you can either invest in income drawdown or buy an annuity with.
The good thing is that you control when you take your income, how you take it, the amount you take, where you invest your fund and what you do with the money you've taken out. The balance of your fund that remains invested, and any funds you've transferred to income drawdown, will benefit from any investment growth. If you decide to keep working, you can even make further payments into your Phased Retirement Plan.
Our self-investment option offers you a choice of over 1,200 funds, discretionary fund managers and specialist property solutions.
However, there are some drawbacks to phased retirement:
- While the rest of your fund remains invested, it may grow. However, if the stock market falls, your fund value may fall. Annuity rates can also vary over time and you might end up with a lower pension than if you'd chosen the traditional annuity route.
- There is a maximum amount of income you can take from money you transfer to income drawdown, which the Government Actuary's Department (GAD) sets.
Phased retirement frequently asked questions
Income drawdown
Income drawdown involves taking an income direct from your retirement fund instead of buying an annuity.
Further information... Who should I talk to?
Speak to your financial adviser to find out more. If you don't have an adviser, the IFA Promotion Service or the Society of Financial Advisers can help you find one.
