Currently, you will need to transfer some or all of your pension fund in the Plum SIPP to another pension plan in order to take benefits. The type of benefits you can typically take from a pension plan are summarised below but you should check the terms and conditions of any alternative pension plan.
Option | From age 55 |
Pension Commencement Lump Sum (tax-free cash sum) | Up to 25% of your fund can normally be taken as a tax-free lump sum when combined with designating funds to flexi-access drawdown or purchase of an annuity. Note: receiving the Pension Commencement Lump Sum does not trigger the Money Purchase Annual Allowance |
Use your fund to buy a lifetime or five-year pension income, often referred to as an annuity | An annuity can be purchased, the amount of which will be determined by the value of your pension fund and annuity rates available in the annuity purchase. Generally speaking, annuity rates depend on interest rates, life expectancy and the type of pension benefits you are buying (e.g. an increasing or level pension and whether any guarantees or dependants’ benefits are included). If you are in poor health or have a lifestyle that could adversely affect your life expectancy (e.g. heavy smoker), then you may get an enhanced annuity rate. Note: income received via an annuity does not trigger the Money Purchase Annual Allowance. |
Draw a pension income directly from your pension fund | Flexi-access drawdown - You may designate some or all of your funds into flexi-access drawdown. The fund remains invested and you can draw as much or as little income from the drawdown fund as you wish when you wish (subject to the Terms and Conditions of the pension plan). The income you draw from the fund will be subject to income tax at your marginal rate. Note: the Money Purchase Annual Allowance is triggered when you first drawdown an income but there is no obligation to draw an income. Uncrystallised Funds Pension Lump Sum – You may use some or all of your funds to pay you this type of lump sum. 25% of the lump sum is tax-free, the remainder will be subject to income tax at your marginal rate. Note: taking this lump sum will trigger the Money Purchase Annual Allowance. |
A combination of the above to meet your individual requirements | You could take a combination of the benefits described above and you do not have to take benefits all in one go. An annuity can be purchased from funds in drawdown as well as from uncrystallised funds. The way in which you take benefits is flexible and can be structured to meet your individual requirements. |