UK Pensions
Wood UK pensions home page
Your retirement benefits
- You can currently retire at any time between age 55 and 75. The minimum retirement age is expected to increase to age
57 on 6 April 2028. - You have various options to make sure your decision suits your circumstances when you retire. You can choose from:
- A cash sum
- An annuity (pension)
- Transferring to a drawdown product
Options when you retire...
If you have chosen to invest in the default arrangements option, you will be asked 8 years before your Target Retirement Age what type of benefit you are likely to take when you retire. Whichever option you choose, you can currently take 25% of your fund as tax-free cash when you retire. The three target retirement paths are:
- Cash retirement fund for those members who wish to take all of their fund as cash on retirement.
- Annuity retirement fund for those members looking for a regular income (pension) route at retirement.
- Drawdown retirement fund for members looking to carry on investing during their retirement and draw cash/income as they need it, using an external drawdown product.
For those members who do not wish to make a choice of target retirement path, the default option will be the Drawdown Retirement Fund. This will be reviewed regularly by the Trustee of the Plan. The choice you make will affect the type of assets that your funds are invested in during this 8 year period. You still have the choice to take any of the three options that are available at retirement. If you have chosen the Self Select option, your Retirement Account will continue to be invested in line with your choices right up until retirement. You have the same options at retirement between cash, annuity or drawdown products as those using the default option.
The amount of your benefits depends on:
- The contribution rate you have chosen and the amount paid in by Wood: The higher the contributions you have chosen to pay, the higher your benefits are likely to be.
- How well your investments have performed: The better your investments perform the faster your Retirement Account will grow. You can check how your investments are performing at any time on the pensions portal. Remember that the value of your investments could go down as well as up.
- Your circumstances on retirement: How old you are when you retire and where you live can affect the cost of buying an annuity – as can your lifestyle and any serious health problems. Other choices such as whether you want to provide a spouse’s pension, will also affect the cost of your annuity.
Cash
Take your fund in it’s entirety as cash when you retire. Currently 25% is tax free with the remainder taxable at your marginal income tax rate.
Annuity
A guaranteed income, usually provided by an insurance company. It can be for the rest of your life or for a fixed period.
Drawdown
Your fund will remain invested and you ‘drawdown’ income flexibly.
When can you retire?
Your Normal Pension Age is 65 but you can retire earlier if you wish. However, you should bear in mind that you will generally receive a lower level of benefits if you retire before Normal Pension Age. This is because your Retirement Account will have less time to grow and it will usually cost more to buy an annuity because it is likely to be paid for a longer period.
You can also choose to retire after your Normal Pension Age if you wish. Under the Plan’s rules, you have to take your benefits by age 75 but you can continue to contribute to your Retirement Account until that age provided you are still working for Wood.
Case study
Molly is aged 56 and plans to retire at age 60. She has been a member of the Plan for 11 years up to now and has paid 7% contributions for the whole of her membership, entitling her to 9% employer contributions.
When Molly joined she earned £32,000 a year and her salary has increased at the same rate as inflation each year. This means that the total amount Molly contributes (via Salary exchange) up to age 60 will be around £40,000 in today’s terms (although the actual cost to Molly is much less than this because of the tax and National Insurance savings she makes). Wood will have contributed around £51,500 in today’s values.
Based on investment returns of 5% a year, Molly could receive a tax-free cash sum of around £32,000 on retirement, and a pension of around £3,000 a year for the rest of her life.
Benefit limits
You need to focus on the finish line and pace yourself.
The Lifetime Allowance (LTA) was removed in the Spring 2023 Budget. However a limit is now in place on the total amount of tax free cash you can take is now restricted to £268,275 if you don’t have any protections in place.
