Does this option meet your needs?

We don’t regularly think about the financial implications of getting older, such as the possibility of needing care or how long you’ll live for. But as you approach later life and need to make a decision about your retirement income, it is important to think ahead.

Only you know your financial circumstances – for example, whether loans or mortgages still need to be paid off and the sort of needs you may have later on.

On average people in the UK, aged 65 now are expected to live until*:

Average life expectancy - Women: 86; Men: 84

Work out your life expectancy with the Government's calculator here

Things to consider

Here are some things to help you consider which options will be right for you. The items highlighted in grey are the most relevant when considering taking a single cash lump sum:

Your RSA pension schemes benefits are your main or only source of retirement income

Taking a single cash lump sum will not provide you with a regular, secure income and will require careful management of your spending and investments to ensure you have sufficient income throughout retirement.

Or, you have other sources of retirement income in addition to your RSA pension schemes benefits

You may prefer a single cash lump sum if you:

  • Are not reliant on the income from your RSA pension schemes for your retirement; and/or
  • The value of your RSA pension schemes is small.

You prefer predictability

  • Once you have taken a cash lump sum you can vary the amount of the lump sum that you spend each year
  • However, you will need to manage your spending and investments to ensure you have sufficient income throughout your retirement.

Or, you prefer flexibility

You can use the cash lump sum to suit your personal circumstances throughout retirement.

You prefer security

  • You will not have the security of a regular income throughout retirement
  • You are able to invest the cash lump sum outside of a pension arrangement, however the value may fall as well as rise.

Or, you prefer opportunity

You have the opportunity to invest or spend the cash lump sum according to your particular needs.

You prioritise short-term income

  • By taking a single cash lump sum you will increase the amount of capital available for short-term spending and investment
  • You are likely to pay more tax by taking a single cash lump sum.

Or, you prioritise long-term income

You will not receive a steady long-term income, as you would with my RSA pension schemes pension or if you bought an annuity.

You have a short life expectancy

  • You have more money available immediately to spend on your priorities before you die
  • No specific pension provision will be made for your spouse or civil partner after you die, however, you can ensure that any remaining cash from your lump sum is included in your estate.

Or, you have a long life expectancy

  • You will need to manage your spending to ensure that you or your spouse/partner have sufficient income throughout retirement
  • If you invest my cash lump sum outside of a pension arrangement, you may be required to pay further tax on any investment returns.

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 RSA pension schemes.

Income (subject to tax)

  • The remainder of your cash lump sum is taxed at your marginal rate of income tax for that year
  • 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.

Meet Ben

4 years. 4 FA Cup Finals. The prognosis had taken some getting used to. Ben had always been a fierce football fan. But the time limit that the doctor had given him felt like a red card. Now he’s determined to live the rest of his life to the fullest, and attend every match he can, before he hangs up his boots.

Ben decided to take the full transfer value as cash and retire early at 55.

A pile of polaroid images

Ben prioritised…

Short-term income

Even though he had a large tax bill to settle, Ben wanted all of his savings as soon as he retired.

Flexibility

He wanted the freedom to retire early and fulfil his football dreams.

Short life expectancy

Ben doesn’t have a lot of time left and is determined to make the most of life.