Member Benefits

Members of our SIPPs and SSASs have the maximum possible control over the timing and method of taking their benefits.

What is crystallisation?

Crystallisation is the name given in the legislation to the act of taking your benefits. You do not have to stop work or ‘retire’ in order to take your benefits. To crystallise your benefits, you just need to have reached the required minimum age (or be subject to one of the circumstances outlined below), and provide us with a completed and signed Member Benefits Form.

When can you take benefits?

The earliest you can normally take your benefits is 55. From this age you can take benefits at any time. Recent changes to legislation have removed the requirement to take your benefits by your 75th Birthday.

If you become permanently incapacitated and cannot carry on your normal occupation (or one of a similar nature), then you may be able to crystallise your benefits before age 55. Certain professions are also allowed to draw benefits at an earlier age (eg professional sportsmen). However, there are specific criteria that must be met for someone to have this option.

What benefits are available to you?

When you crystallise your benefits, you are entitled to receive:

1. A lump sum payment, which is paid tax free (known as the pension commencement lump sum), and

2. A pension for the rest of your life which is taxed as earned income. You can take your pension either through an annuity, through income drawdown (as flexible drawdown or capped drawdown), or via scheme pension.

What is the lifetime allowance?

The lifetime allowance is the maximum amount you can accumulate free of tax across all of your pension funds. It is £1.8 million for the 2011/12 Tax Year. However it will reduce to £1.5 million for the 2012/13 Tax Year. We will test your fund against the lifetime allowance when you come to take your benefits and you have to pay tax on any excess.

For individuals who run the risk of exceeding the reduced lifetime allowance there is an option to claim 'fixed protection' by the 5th April 2012. This will protect you pension funds from the tax charge, but only up to the level of the old lifetime allowance (ie £1.8 million).

If you had applied for the earlier options of enhanced or primary protection then any funds exceeding the lifetime allowance when you crystallise may also be protected from the tax charge.

Do you have to crystallise your whole fund in one go?

You do not have to crystallise your whole fund in one go. Instead, you can take your benefits in stages. To do this you crystallise part of your scheme and take benefits from this crystallised fund leaving the rest uncrystallised. There are two ways that you can take advantage of this option:

1. Partial Drawdown - Each portion of fund that you crystallise will pay you a pension commencement lump sum and pension. You can therefore crystallise an amount of your fund that would provide you with the lump sum and/or pension that you need.  You can then crystallise futher tranches as and when you want to.

2. Phased Drawdown - You can decide on a total level of net income that you would like to receive each year. We will then crystallise an amount of your pension fund which will pay you a pension commencement lump sum and net pension which will add up to this desired level. In year two, we will crystallise a further amount of your pension fund which will pay you an additional pension commencement lump sum and pension which will again add up to your desired level of income. We will do the same in year three and so on. In this way, you crystallise a portion of your fund each year and use the pension commencement lump sum and pension to provide you with the income you need.

With both of these options, we can calculate how your fund can be used to provide for your needs and explain the different options available.