Income in retirement

What can you expect from your pension when you retire?

You can decide to start taking benefits at any time from the age of 55 years old.
You can take up to 25% of the fund your contributions have created as a tax-free lump sum under current rules.
The remaining 75% of the fund is either invested to provide you with an income for life (called an annuity), or can be used to provide an income through a 'capped' or 'flexible' drawdown plan.
The size of the income you generate depends on the size of your fund, the investment conditions at the time you choose to retire and any options you decide to incorporate into your income, such as regular increases.
You pay income tax on the money you receive from your personal pension. It is taxed in the same way as if you had earned it.

You may be entitled to a basic state pension which for this year is up to a maximum of £102.15 a week for a single person and £163.35 per week for a married couple.
The state pension currently rises by inflation each year. From April 2011, the state pension rises in line with average earnings, prices or 2.5% (whichever is the highest).
You may be entitled to a second state pension bought by a percentage of your National Insurance contributions.
The level of your second state pension (S2P) is determined by your earnings level and the number of years that you have contributed, or been credited with contributions, to the scheme.
You may have left the scheme some time in the past and redirected contributions to your own private arrangement - this is called 'contracting out'. If this is the case, you could begin to receive an income from this type of arrangement any time from age 55.
The self-employed do not qualify for a second state pension.

The Pension Credit is a means-tested benefit. Between 6th April 2010 and 5th April 2020 the age from which you may get Pension Credit will change. You can use the following State Pension age calculator to find out more about the rise in women's State Pension age and when you can apply for Pension Credit. State Pension Age Calculator
It has two parts - a guarantee credit and a savings credit.
Guarantee credit - this tops up your weekly income to a guaranteed level.
Savings Credit - this is for people who have a small amount of income or savings.
You may be able to claim either part of the Pension Credit separately or together, depending on your circumstances.
The amount of Pension Credit you are entitled to depends on your personal needs and the income you already receive.
The basic state pension rates for the tax year April 2011/12:

	Weekly
One person	£102.15
Man with dependent wife	£163.35
Couples who have both paid full national insurance contribution	£102.15 each

The Pension Credit means that if your income is below a certain level, you are entitled to a minimum guaranteed income of:


Single person	£137.35
Married couple	£209.70

You can generate additional Income by carefully placing your money in tax efficient investments such as Individual Savings Accounts.
From the age of 55 through to age 75, you can also invest up to £3,600 a year gross in an 'immediate pension', without evidence of earnings. Subject to the eligibility rules, you can do this whether you are working or retired. This entitles you to a tax free cash sum and a guaranteed income for life, with tax relief on the contributions, allowing you to boost your income even if you're already retired.

Find out about NFU Mutual's Annuity policy in the FAQs section.

The tax treatment of pensions and ISAs depends on individual circumstances and may change in the future.

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