Freedom and Flexibility
From April 2015, there will be radical changes to the options you have when you retire. Everyone over the age of 55 with defined contribution pension savings will be able to access their fund as they wish, subject to income tax.
Pension funds don’t have to be used to buy a pension any more. The new choices fall under three headings:
- Buy a pension in the same way that you can right now.
- Keep your fund invested, but make withdrawals from your fund.
- Take your entire fund as a cash lump sum.
There are tax implications connected with all of these options, although the ability to take up to 25% of your pension fund as a tax free cash lump sum will remain in place.
It will be important that you consider things carefully before deciding which route is best for you. That’s why the government is making plans to ensure you have access to free and impartial guidance about your retirement choices.
New approach to Investment
The increased flexibility means that we have reviewed how we invest your contributions in the years leading up to retirement. Up to now, we have tried to provide a level of protection for those who are approaching retirement, by gradually switching funds into the Retirement Protection Fund that was designed to match the changing cost of buying a pension for life. That strategy will not suit most of our members any longer.
The new approach is explained in the update member guide (include link), but to summarise, in the years leading up to your retirement, we will now gradually move your fund and the contributions we receive, into the Retirement Countdown Fund. The Retirement Countdown Fund invests in cash deposits which we believe is a more appropriate place to be.
The retirement options available to you, as well as the provision of guidance to help you make the right decisions based on your circumstances, will become clearer over the next few months and we will update the website accordingly.