Phased Retirement through annuity purchase
Phased retirement (also known as 'staggered vesting') allows the purchase of a pension to be phased allowing flexibility when considering retirement.
Phased retirement works by splitting the pension into many segments each of which could be encashed separately. The pension income is then composed of a combination of tax free cash and annuity from the individual segments. The remainder of the fund remains invested and may benefit from any market growth in its underlying investments.
From April 2015 there is now much greater freedom to choose how you use your pension fund and the rules regarding phased retirement are now largely irrelevant as there is so much flexibility in how you take pension. See New Rules About Pensions.
Since 6 April 2015 there are four methods of 'phasing' at retirement:
- phased annuity purchase (as described above);
- phased capped drawdown (for those individuals in capped drawdown before 6 April 2015);
- phased flexi-access drawdown; and
- the phased taking of Uncrystalliised funds pension lump sum (UFPLS)
A PENSION IS A LONG TERM INVESTMENT THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN. YOUR EVENTUAL INCOME MAY DEPEND UPON THE SIZE OF THE FUND AT RETIREMENT, FUTURE INTEREST RATES AND TAX LEGISLATIONS.