Vodafone pensions

Retirement options

When you retire you’ll be able to use your account in the following ways:

  1. Take the entire amount as cash (taxed at your marginal rate i.e. 20%, 40% or 45%)
  2. Use a drawdown arrangement
  3. Buy an annuity.

You can also choose a combination of these options. Regardless of your retirement choice, you’ll need to transfer your account to a provider outside of the Plan. Please contact Willis Towers Watson if you’d like further information about the process.

You might want to think about aligning your investments with your expected retirement option. For example, if you think you may want to take cash at retirement, you could think about investing in the Cash Lifestyle option, or one of the appropriate self-select options.

1. Taking your account as cash

You can take your account as cash. For more information visit the Q&As of the website.

  • You’ll receive the first 25% tax free.
  • The remainder will be taxed at your marginal rate (for example, 20%, 40% or 45%).

Advantages

  • It gives you the flexibility to pay off a debt or put the cash into another type of savings vehicle, like an ISA.
  • When you die, any cash you haven’t spent will form part of your estate.


Disadvantages

  • You need to manage when and how you spend the money.
  • Once you’ve spent it, you will need to find an alternative source of income.
  • It may not be the most tax-efficient way of accessing your account.

2. Using a drawdown arrangement

A drawdown arrangement enables you to leave your fund invested (with a provider outside of the Plan) and decide how much income to take and when. You can stop, start or vary income to suit your needs and tax position. There are no restrictions on the amount you can withdraw.

You can also take up to 25% of your account as tax-free cash.

Advantages

  • As your money remains invested, it has the chance to keep increasing in value.
  • When you die, the remainder of your fund can be passed on to any beneficiary.

Disadvantages

  • You need to make sure the money doesn’t run out.
  • Your fund will be subject to the investment market, so its value could go down as well as up.

3. Buying an annuity

An annuity is an income for life; to buy an annuity you will need to transfer your account to a provider outside of the Plan.

You can choose the type of annuity you want to buy. There are a number of options, which will affect the amount of income you receive, for example you might buy an annuity that:

  • increases each year; and/or
  • provides a spouse’s pension when you die.

You can also take up to 25% of your account as tax-free cash.

Advantages

  • Your money won’t run out – you’ll have a regular income for the rest of your life.
  • You can choose to provide an income for your spouse when you die.


Disadvantages

  • If you don’t shop around, you could get a poor deal – the amount you receive will be agreed on the day you purchase the annuity.
  • If you die soon after buying an annuity, then you may not benefit from all of the money you paid in.

How do I decide?

Think about how much money you might have when you retire and how you might want to use that money. The options have advantages and disadvantages. You may also be taxed differently depending on the option you choose. You might want to speak to a financial adviser to decide what’s best for you.

To find out more about your options at retirement and how they work please visit the Pension Wise website – a free and impartial service offering information and guidance to people approaching retirement with a defined contribution pension.