Transfer out and…
Take a single cash lump sum
At a glance…
If you choose to transfer out of the Aliaxis DB Scheme and take a cash lump sum, you’ll have:
- A single cash lump sum – based on the value of your Aliaxis DB Scheme benefits
- Tax-free cash – the option to typically take up to 25% of your transfer value as a tax-free cash lump sum at the point you retire
- To pay tax on the remainder of your cash lump sum
- No guaranteed income for your retirement.
How long might you live?
People are living longer. Improved healthcare, working conditions and a reduction in smoking rates have all contributed to increasing life expectancy from generation to generation.
Understanding how long you might live is an important part of planning for retirement, especially if you’re considering the drawdown option, as you’ll need to make sure your money lasts as long as you need it to.
The National average for a typical 65-year-old, in good health, as at July 2024 is shown on the right.
So, if you are retiring at age 65, you could live for at least 20 years after that (based on data from the Office of National Statistics). That’s 20 years of paying for the things you’ll need and want.
But we’re not all ‘typical’, it’s possible you could live a shorter time or much longer than this. In fact, 1 in 4 65-year-old retiring now could live in to their 90s and 1 in 33 could live to 100, so they’d need to manage their money wisely!
Ben’s choice
Because Ben had other retirement savings, which would provide him with more than sufficient income in retirement, he wanted to take this pension as a cash lump sum. So, after taking financial advice, he transferred out of the Scheme, took a cash lump sum and used the money, after tax, to enjoy his hobbies.
Ben’s choice is just an example and does not suggest a particular option that you should choose yourself. Please look at all of the options available to you and consider seeking independent financial advice before making any decisions about your own benefits.
Why this option might suit you
Here is a list of characteristics that this option provides or doesn’t provide. Have a look through and see if these characteristics suit your personal circumstances. For example, is the reassurance of a regular income for the rest of your life a priority or would you rather withdraw money as and when you need to?
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The reassurance of a regular income for life | X NO |
Taking a single cash lump sum will not provide you with the reassurance of a regular income for life. |
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Pension increases to protect against inflation | X NO |
You will not have any guaranteed protection against increases in the cost of living (inflation). |
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A pension for my spouse/civil partner/qualifying dependent on my death | X NO |
You can leave any leftover money to your spouse/civil partner/qualifying dependent but there is no pension payable to them. |
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Leaving an “inheritance” | ✔ YES | You can pass on your remaining money to your dependants when you die. |
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Something easy to manage | ✔ YES |
If you don’t invest the money. |
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Money to use now | ✔ YES | You get all of it (some of which is subject to tax and you may get a large tax bill). |
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The flexibility to change my income when I like / need | X NO |
It’s a single cash lump sum. |
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The ability to invest my money myself | ✔ YES |
You can choose to invest any of your money through self-investment. |
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Suitable if I expect to live a long time | UNLIKELY | You control how much you spend over time, so this depends on how you manage your money and how long you live.
It’s worth noting that on average (based on national figures from the Office for National Statistics) we’ll live until our mid-80s, however there’s a 1 in 4 chance you’ll live in to your 90s and 3 in every hundred people retiring now will live to be 100 years old. |
Tax
Tax-free cash lump sum
- You can take some of your benefits as tax-free cash (usually up to 25% of the benefit value)
- The amount you could take depends on the value of benefits you transfer out of the Aliaxis DB Scheme and is subject to the Lump Sum Allowance (see Tax & State benefits section).
Income (subject to tax)
- The remainder of your cash lump sum is taxed at your marginal rate of income tax for that year (20%, 40% or 45%)
- Taking all of your benefits as a single cash lump sum is likely to increase the amount of tax you pay as the lump sum will increase your income in the year you take my benefits
- You may need to pay further tax charges on any investment returns generated by investing the cash lump sum outside of a pension / Drawdown arrangement.