When can you take pension benefits?
At any time between ages 50 and 75 (or ages 55 and 75 after 5th April 2010). This includes any Protected Rights. If you are in ill-health, you may be able to take the Non-Protected Rights earlier.
Tax-free Lump sum
When a member starts taking benefits from part of their SIPP, they can usually take part of their funds as a tax-free lump sum at outset (called a ‘Pension commencement lump sum’). In most cases the maximum they can take as a lump sum will be 25% of the funds being vested; and there are exceptions.
Pension income – annuity or income withdrawals
The remaining funds (generally 75% of the funds being vested) must be used to provide the member with a pension income. This can be done in one of two ways:
- by using the funds to buy an annuity income payable for life from an insurance company (called a ‘Lifetime annuity’)
- by drawing an income direct from the SIPP through what is called ‘income withdrawal’ (or ‘income drawdown’), subject to certain rules
All pensions are subject to income tax, whether paid direct from the SIPP as income withdrawal or through an annuity contract. Tax will be deducted through PAYE.
Phasing benefits
Each Pointon York SIPP will normally be divided into 1,000 notional Segments on establishment. A member can decide to draw benefits from these Segments independently of each other, enabling them to phase in their benefits over time (up to age 75).
Any Protected Rights held in the SIPP are segregated from other SIPP funds and split separately into 1,000 Segments. Any income drawn from those Protected Rights cannot be proportionately greater than any income drawn from the other SIPP funds.
Lifetime Allowance
There is an overall ceiling on the amount of tax privileged pension benefits that a person can be provided in their lifetime from all registered pension schemes after 5th April 2006. This is called the Lifetime Allowance - read our Fact Sheet for further information.
Age 75
The income withdrawal - Alternatively Secured Pension (ASP) rules post age 75 are more restrictive - our Fact Sheet provides further information. Income withdrawls before age 75 are known as 'Unsecured Pension'.
Death Benefits
Read our Fact Sheet to find out information on what happens to any remaining SIPP funds on the death of the member.