When you get closer to retirement, there are lots of things to consider. One of those is how to take your pension from the Scheme. Watch the video below to help you understand the options available and what to keep in mind to help you get the retirement that's right for you.
Your options.
1. A regular four-weekly income (pension)
You can choose to take all of your pension as a regular four-weekly income (pension) which you'll receive for the rest of your life.
2. A smaller pension plus up to 25% tax-free cash lump sum
Alternatively, you can choose to take up to 25% of your pension fund as a tax-free cash lump sum at retirement. You'll receive the rest as a regular income (pension) for the rest of your life.
Here are some things to consider if you're thinking of taking this option:
- The cash lump sum is only paid once - you will have to rely on the the smaller pension forever. Will it be enough?
- The pension built up before 1 June 2012 is increased in payment in line with RPI* up to 5% a year and the pension built up after 1 June 2012 in line with CPI* up to 5% a year. When you give up part of your pension for tax-free cash, you are also giving up any annual pension increases on that part of your pension
- If you live for a long time after retirement, the pension that you give up over your retirement could be more than the tax-free cash lump sum
- Pensions are normally taxed as income. But if you are not likely to pay income tax on your pension, because your income is below a certain level, you need to consider whether you need the tax-free cash
- Is the amount of tax-free cash good value for the pension you're giving up?
* Inflation is based on Consumer Price Index (CPI) for pension built up on or after 1 June 2012 and Retail Price Index (RPI) for pension built up before 1 June 2012
3. All as cash (if eligible)
If your total pensions are worth less than a certain value set by the Government, instead of an ongoing pension, you may able to take it as a one-off cash lump sum which may be taxable, this is known as trivial commutation. If this applies to you we will let you know.
To help you decide which option is best for you, click the link below, for some information on things to consider before you take your pension.
4. Transfer your pension out of the Scheme
You can choose to transfer your pension to another employer's pension scheme, or to a personal pension, at any time before you retire.
If you transfer your pension to another arrangement, you may be able to access some other options for taking the money that's in your pension.
Something to bear in mind...
Transferring out gives you more flexibility to use your retirement savings in a way that suits you. But you will be giving up a lot of guaranteed benefits from the Tesco Pension Scheme that you may find hard to replace somewhere else. So you should consider this very carefully before you make a decision.
Take a look at the table below that highlights the differences between options:
