Phased Retirement
Personal Pension for Phased Retirement
If you and your client decide that immediate purchase of an annuity is not the best option for their needs, phased retirement may be an alternative. By dividing the policy into segments, your client may take benefits from their pension fund gradually by 'encashing' segments (individually or in groups) of their policy in a way that meets their income needs.
This approach allows clients to convert periodically, usually yearly, the required number of segments into tax-free cash and an annuity which together will provide the income they require for the period in question. The remaining segments of the contract continue to be invested in the wide range of Scottish Widows funds available under this option.
This procedure is repeated until such a time that it may be more beneficial to convert all the remaining segments into tax-free cash and annuity. The entire remaining fund must be used to purchase an annuity by age 75.
This option means your client does not have to make a once-and-for-all decision to commit their entire retirement fund to purchase an annuity, and it gives them more flexibility over the timing of this decision. It does, however, introduce uncertainty regarding the benefits they may eventually receive, since these will depend on future annuity rates and investment returns.
Consequently, this option is likely to be better suited to those investors who are not totally, or even mainly, reliant on their pension fund for an income during retirement.
Further Information about our Retirement Income Products
For further information on Scottish Widows Income Drawdown offering, our Product Comparison and Product Guide (pdf 183k)
pages may prove useful.
