Retirement Planning means big decisions

Your staff will want to find out as much as they can about their options before they decide how to access their pension savings for retirement.   Once they turn 55 years old - or possibly before if they retire early due to ill health - they can start taking money out of their pension savings if they wish.

It’s a good idea for them to get some guidance and possibly advice to help them to decide – we recommend they start by going to The Money and Pensions Service for free impartial guidance.

The problem for employers is that different pension providers can offer different options.  Some providers will give staff the full range of options (see below), whilst others may only offer one option.  This can be an issue because:

• it could lead to the individual choosing the only option (which may not be the best choice for them)
• it forces the individual to have to shop around (which can be time consuming and difficult)

Therefore it’s important that employers understand what options are available from their Workplace Pension provider – otherwise staff may find it difficult to retire!

Currently, the options available to members of Defined Contribution Workplace Pensions are:

1. Keep it where it is

If you don’t need to access your pension pot, you can leave it invested. This means you can continue to save and your pension pot may grow. But, as with all investments, there’s a risk that the value can go down as well as up.

2. Take it all in one go

If you take your whole pension pot in one go, you may pay tax on 75% of it at your highest tax rate for that tax year - which means you could end up with a big tax bill.  There are different ways of doing this depending on how much is in your pension pot.

3. Take it a bit at a time

You could take your pension pot a bit at a time over a number of years. There are two different ways of doing this depending on how you want to take your 25% tax-free cash.

4. Buy a guaranteed income

You could give all of your pension pot(s) to an annuity provider in exchange for a guaranteed income. Or you can take your 25% tax-free cash first, and then use the other 75% of your pot to buy a guaranteed income. There are different types of income - and the amount you're offered will depend on the options you choose.

As mentioned, some Workplace Pension providers give members access to all these options, some only offer one option.  To support your staff for their retirement and financial wellbeing, understanding what options your pension provider offers is important.  

This can be backed up with one of our dedicated ‘Retirement Workshops’ which can be provided onsite or via Microsoft Teams.  Our Retirement Workshops are aimed at educating staff who are approaching retirement about how they can use their State Pension and Company Pension to support their retirement.

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