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Taking your benefits
Planning for your retirement
The DB Normal Retirement Age under the Scheme is 65, although this may differ depending on your membership category or when you left the Scheme. However, you can choose to take your benefits at any age from 55 to 75. In some cases the Trustee needs to agree to you taking your benefits early. See your DB member guide and, if applicable, the 2009 Change leaflet for more information. These can be found in the information centre.
If you paid Additional Voluntary Contributions (AVCs) or bonus sacrifice savings into a DC pension pot you will also have a Target Retirement Age (TRA) for these benefits.
You may want to think about what age you want to take your DB and DC benefits so that you can target your DC investment choices to that age. If you want to view or update your TRA for your DC pension pot simply log on to My Pension.
Generally you can take up to 25% of the total value of your benefits (up to the Lifetime Allowance) from the Scheme as a tax-free cash sum. To work out what that is, the value of your DB pension and the money in your AVCs are added together.
If the value of your AVCs is 25% or more of the total value of your Scheme benefits, you can take your maximum tax-free cash from that (provided you take your DB and AVCs at the same time) – this means that you don’t have to give up any of your DB pension in exchange for cash if you don’t want to. Any AVCs left over can be used in other ways (such as to provide a further regular income or to transfer out and draw down regular sums from) and you’ll be told about your options when you come to take your benefits.
If the value of your AVCs doesn’t cover the maximum tax-free cash sum you can take the remainder by exchanging part of your DB pension as well if you want to. If you do this, it will reduce the DB pension amount you receive.
You can use some or all of your DC pension pot to buy an income (called an annuity) with a provider of your choice. If you want to, you can take up to 25% of your DC pension pot (up to the Lifetime Allowance) as tax-free cash then use the rest towards securing an income. The income you’ll get from your annuity depends on a number of things, including:
The value of your DC pension pot
Annuity rates at the time you’re buying the income
The type of annuity you choose – for example, you might want to include a pension for a spouse or civil partner in case they outlive you
Whether you buy an annuity that increases or remains level
Your health – if you’re in poor health you might be able to get a higher income (this is known as an impaired life annuity)
Whether you wish your annuity to payments to continue to be paid to a dependant if you die during a specified period of time after the annuity starts (known as a guarantee period)
Take all your DC pension pot in one go - this is sometimes known as an Uncrystallised Funds Pension Lump Sum (UFPLS). This option gives you the opportunity to take 25% — up to the Lifetime Allowance — tax-free and the rest is then taxed at your marginal income tax rate* (taking benefits this way may affect any ‘means-tested’ benefits you might be entitled to. If you are still working when you decide to cash out for the first time, you can start to save again in a pension scheme, however please note that you will have trigged the Money Purchase Annual Allowance. Currently, you can avail to cash out once every twelve months). If you are entitled to a higher tax free cash lump sum this cannot be taken as an UFPLS.
*HSBC’s Administration Team won’t have your tax code so you’ll pay tax at the emergency rate (i.e. without any personal allowances) on the cash amount over the tax-free limit. You’ll need to reclaim any overpaid tax yourself. You can find more information about this here or you can contact your HMRC office.
This is also called ‘flexi-access drawdown’. First, you’ll need to transfer your DC pension pot out of the Scheme to a provider offering a drawdown facility. Then you can take up to 25% of your DC pension pot (up to the Lifetime Allowance) as tax-free cash and invest the rest in one or more funds. These let you take income when you like, for example, monthly or on an irregular basis. You’ll pay tax on this income at your marginal income tax rate.
Cash out and drawdown DO NOT give you a guaranteed, regular income.
Money Purchase Annual Allowance
Taking all your DC pension pot (or any other money purchase savings you have) as cash, opting for flexible drawdown or taking reducing annuities when you’re over the age of 55 will trigger the Money Purchase Annual Allowance for any future DC contributions you may make into other Schemes.
You can find out more about the Money Purchase Annual Allowance and other limits on tax relief at the Money Advice Service
Help to make your choices
Are you aged 55 or over and thinking about taking your DC pension pot?
If so, there's lots of information to help and guide you through your options.
Pension Wise
Pension Wise is backed by the Government.
It gives free, impartial guidance to help you understand your options and how they work.
The Money Advice Service also offers free and impartial money advice. They’ve produced a guide 'Your pension - it’s time to choose', in conjunction with Pension Wise, which explains your choices.
