Case Study: Taking your tax-free cash, and a fixed term income
“I just need a fixed income for a few years”
- Is aged 61
- Is reducing his hours of work
- He has a pension pot of £100,000 (after tax-free cash)
- Wants a temporary guaranteed income
- Looking to fully retire at the State Pension age of 66
A retirement solution
John has recently reduced his hours at work and is looking for a secure income to supplement his earnings until his State Pension becomes available at age 66.
He doesn't want to purchase a lifetime annuity at the moment but would like to access his tax-free cash. He decides that he needs an income of £5,000 for each of the next five years and also opts for a guaranteed maturity value (GMV) at the end of the term. "I just need a fixed term income for a few years" he said.
The GMV will provide John with a lump sum that he can use to purchase a lifetime annuity, transfer into a flexi-access drawdown or take as a taxable lump sum.
With the CanRetire Fixed Tern Income Plan (FTIP), John can access his tax-free cash and provide a guraranteed income. John can choose the level of income, in this case £5,000 a year for five years, with any balance providing the GMV which will be known from the start of the Plan.
- Choose the term between 1-20 years
- Select income and/or growth options
- Have a level or escalating income (0.1% - 10%) each year
- Take up to 25% cash at outset
- Provide a death benefit for beneficiary(ies)
- Reassess options at the end of the term
How it Works
The figures used in this example are for illustrative purposes only.
- You invest £100,000 in a pension pot for five years
- You receive an income of £5,000 each year for five years (£25,000 over fixed term)
- At end of fixed term, you receive a guaranteed maturity value of £80,000
The FTIP does not pay an income for life and where a Guaranteed Maturity Value (GMV) is paid at the end of the term this may not be enough to provide you with the same level of income had you bought a lifetime annuity at outset rather than investing in the FTIP.
Any income taken from the FTIP will reduce the amount that can be paid into a money purchase pension each tax year to £10,000. This is known as the Money Purchase Annual Allowance (MPAA).
Who is it suitable for?
- Aged 55 or over
- Have a minimum of £10,000 to invest (after tax-free cash)
- Want guaranteed income and/or growth for a fixed term
- Those looking for a level or escalating income (0.1% - 10%)
- Want to access their tax-free cash at outset
- Want a death benefit for the beneficiary(ies)
You should speak to a professional adviser to ensure that FTIP is suitable for you.