You only retire from the Fund once, so the process of retiring – the many choices you need to make and steps you need to take – may surprise you. If you’re age 55 or over and think you’re ready to take your benefits, here’s a few things to know and do.
When you can take your benefits
Usually you can take your full pension benefits when you reach your Normal Pension Age (NPA). For most members NPA is either age 60 or 65, but it’s not the same for everyone. You can find your NPA here.
You could take your benefits earlier or later than your NPA, which can affect how much pension you receive:
Taking benefits early
The earliest you can take your benefits is age 55, unless you are retiring because of ill health.
But remember… Because of the way it’s calculated, taking your pension early will mean you will receive less than if you had taken it at NPA. This is because you will likely be receiving it for longer. If you’ve been off work for a long time because of ill health, you may be able to get your benefits early.
Taking benefits later
You might be able to delay taking your benefits until after your NPA. If you do this, the value of your benefits may increase to reflect the fact that you’re taking them later, and that they will likely be paid for less time. How much they increase depends on your NPA, which Fund schedule you’re in (check your Schedule Factsheet), and how much pensionable service you have. If your NPA is 60, you may also have the option to increase your NPA to 65. Read your NPA 60 guide to understand more.
See the impact of taking your benefits earlier or later by getting a retirement quote and selecting a retirement date past your NPA.
Your retirement options
You have two options for how you take your main Fund benefits to pay for life after work. Each option has some ﬂexibility to help you shape your income:
You could take your benefits through the Fund.
- Take your benefits as a regular income (pension), paid directly into your bank account. It’s guaranteed to last you for the rest of your life, so you don’t need to worry about this income running out. Depending on which part of the Fund you’re a member of, your income could go up a bit every year to make up for rising prices. But these increases are capped, so they might not keep up if inflation is high. See your Schedule Factsheet for more detail on increases to your pension.
- Swap a portion of your benefits (usually 25% of their total value) for a cash lump sum. You’ll get this money tax free. You can then take the rest of your benefits as a regular income, but the amount you’ll receive every year will be lower than if you’d not taken the cash lump sum.
- Take all your benefits as a cash lump. If your Fund benefits are worth less than £10,000, you could choose to take that money in one go, instead of having a regular/annual income. If your Fund benefits are worth more than £10,000 you can still take them all as cash, as long as all your pension arrangements in total are worth less than £30,000. You might want to do this if the value of the income you could take instead would be very small. You’ll probably have to pay tax on some of the money you get.
You could transfer your benefits away from the Fund.
You can exchange your Fund benefits for a pot of cash (called a transfer value). You’d need to use this to secure a retirement income, tailored to your needs, outside of the Fund, with another approved scheme or provider.
Transferring could give you more freedom and flexibility over how you receive your benefits. For example, you could invest the money in a private scheme, where your benefits would depend on investment returns.
But transferring out of the Fund could also leave you worse off. You’ll be giving up a guaranteed income for life which may increase while in payment, as well as valuable benefits for your loved ones when you die, in exchange for a set amount of money that could run out.
IMPORTANT: If your transfer value is over £30,000, you must speak to an independent financial adviser before transferring.
How you can take your additional pension contributions (APeCs)
On top of your main benefits, you have the option of saving up extra money – called Additional Pension Contributions (APeCs).
As mentioned in Your retirement options you would usually have an option to take a certain amount of tax-free cash from your pension. The total amount you’re allowed to take is approximately 25% of your total benefits (including your APeCs). Most people use their APeCs to take as much tax-free cash as they can without reducing their regular pension income. So if the value of your APeCs is more than the amount you can take as a tax-free cash lump sum, you can take all your APeCs as tax-free cash.
If you don’t want to take your APeCs as a tax-free cash lump sum, or if you have any remaining after taking a cash lump sum, there are 3 main options. You could:
Buy an income
You can use some or all of your extra contributions to buy a guaranteed income from an insurance company. This is called an annuity. Different companies will offer different annuity rates, so it’s important to shop around. Once you’ve bought an annuity, you might not be able to change it.
Take your money a bit at a time, called ‘drawdown’
Drawdown means you’d invest your money and take an income from it when you need it. You’d have to move the money in your APeCs pot out of the Fund to do this, and it would be up to you to manage your money so that you have enough for the rest of your life.
Take it all as cash
If you take out more than 25% of the value of your total pension, you’ll have to pay tax on the extra.
Did you know?
If you still work for the bank, are over the minimum pension age, and want to access just your APeCs, you don’t need to opt out of the Fund. You can transfer your APeCs to another approved provider and still remain in the Fund – and preserve your Fund benefits until you’re ready to take them.
Your personal quote
If you are over the minimum pension age (55, but increasing to 57), you can get a personal quote of how much you could expect at retirement by logging into your pension record. You’ll need to give us a date at which you’d like to retire, as well as a few more details, and we’ll show you a personal video explaining how much you can expect to receive annually – both with a chosen tax-free cash lump sum, or the maximum tax-free cash lump sum you can take. You can also download this information as a pdf.
Tax at and in retirement
Your pension income is normally treated as earned income for income tax purposes, but you don’t pay National Insurance contributions on it. When you come to start taking your benefits, you can normally choose to take up to a quarter of the value as tax-free cash. If you choose to do this, this will reduce your pension income and in turn, how much tax you’ll have to pay.
Did you know?
How much tax you pay depends on your total taxable income.
Your total taxable income is made up of your pension from the Fund, but also any income from other sources, including the State Pension. If your total taxable income (known as ‘gross income’) is less than your personal tax allowance, you won’t pay any income tax. If your gross income is more than your personal allowance, you are liable to pay income tax on the amount that is over your personal allowance.
Different rates of income tax apply depending on the type of income and how much it is. The government will give you a tax code, which shows how your income should be taxed. When you get your pension income from the Fund, we will normally use your code to deduct tax before paying the rest to you. Most pension schemes work in a similar way.
Your retirement timeline
Taking your benefits can take time. Once you’ve notified the bank (if you’re still working at NatWest) or your current employer, you’ll also need to contact the administrator to advise of your intention to retire. From then, the process can take between 3 to 6 months, depending on your circumstances and your choices. To help you understand what’s required, and how much time you should allow, use the online Retirement Timeline. You’ll need to fill in your intended retirement date, and we’ll give you a steer of what you should be doing, and by when, to be able retire at your chosen date.
Get ready to retire
Get a quote to see how much your Fund benefits are worth now or at a future date.
Track down other pensions to work out what your total your retirement income could be. You can also get a State Pension forecast to complete the picture.
How much is enough?
The Retirement Living Standards suggest £20,000 is the minimum income a single person needs for a moderately comfortable lifestyle. Is this enough for the life you’d like when you stop working?
Remember that before you retire you can boost your benefits by paying or increasing your additional pension contributions (APeCs).
Work out when. Use the retirement timeline to see what you’d need to do and when, to retire by your ideal date.
When can I take my benefits?
The Normal Pension Age (NPA) for taking Fund benefits, for most members, is age 60 or 65 (check your Schedule Factsheet). You can retire earlier than this, currently from age 55, but your lifetime income (pension) would be lower. You could also retire later than your NPA and your pension may increase. Get a retirement quote to have a better idea of what you’ll get at any particular age.
When you decide the time is right…
Six months before you’d like to take your benefits:
- tell your manager (if you still work for the bank). Confirm when you intend to leave work on Workday by actioning a 'Job Change' on your Profile and ensure you both complete all Workday actions
- contact the administrator to advise of your intention to retire. They will then send you a retirement pack for you to fill in and return. But before you do…
- research your options, and perhaps get financial advice to make the best choices for you
- beware of scammers and stay safe.