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How Does It Work?
Flexible Income

The principle is very simple. Usually you take some or all of your tax free cash sum and then leave the remainder of your fund invested. Each year, you decide how much income you need. The income is disinvested and then paid to you through the payroll each month, or less frequently as required. The income is taxed as usual.

If the funds continue to grow, then the income you have taken will be partly or wholly replaced by investment return and then you repeat the exercise each year until and if you decide to buy a pension.

By taking some of your benefits, you will change the benefits payable on your death so you need to think about this as well.

the benefits of investing in retirement

  • Your funds remain invested and hopefully continue to grow which should help increase your ultimate pension
  • You can defer buying a secure income until you are older when it should cost less or not buy a secure income at all
  • You can avoid buying your pension when interest rates are very low and the cost of your pension is higher than normal
  • You still receive an income which you can set each year to reflect your personal circumstance
  • The value of your fund is payable if you die, subject to any tax charge

the risks

  • You are leaving your funds invested so there is a risk that the value may go down as well as up
  • The cost of a secure income may increase unexpectedly because of changes in the annuity market
  • Your income is not guaranteed and you may end up with a smaller income than you expected
  • The risk of your fund running out before you die because investments fall or do not grow as much as anticipated or you take a higher level of income

you should consider advice

This option is not right for everyone and you should consider taking advice from an Independent Financial Adviser.

The information on this page is provided in good faith but is not legal or financial advice or binding on the Trustee. The trust deed and rules will override in the event of any inconsistency.

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