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How to Take your Pension Fund when you stop working

The State Pension age is currently 65 for both men and women, but you may be able to enjoy a private or occupational pension before that. There are however many factors to be considered before making any decision to take an annual income from your pension fund.

One of the most important changes in the pension field in recent years is that the amount of money a typical pension plan pays out has dwindled rapidly to about half of that which you could have got say 25 years ago.

Many pensions are paid using an annuity, This provides an income for life which can be paid monthly, quarterly at some other fixed interval. Under the current rules you can usually take 25% of the accumulated value of your fund as a tax free lump sum, and then take an annuity on what’s left.

But because annuity rates have shrunk badly the government has been under pressure to change the rules to give more flexibility and has indeed made some changes,

The annuity rate you will get depends on factors such as your age, medical condition, whether you are a smoker, and whether you are male or female.

You can choose to have benefits paid to your spouse after you die or to have an annuity that starts small and grows year by year to help keep up with inflation although you will have less money in the early years.

You are allowed to get your annuity from a different provider. And rates vary from provider to provider, sometime by as much as 20%. So its vital to get advice and to shop around before you choose which annuity to have and from which company.

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Copyright First Union 2007