There is a popular misconception that pensions are something you get ‘at pensionable age’ and that therefore saving by way of pension policies offers little in the way of flexibility. This is certainly true of the state pension, which is payable as of right at the statutory retirement age. The state pension can be deferred, but that is seldom advisable.
However, the reality relating to personal pensions is somewhat different. For example, if the pension scheme rules permit it and you were born before 6 April 1960, your pension fund can be used to provide a pension at any time (up to age 75, when it must be taken) after the age of 50. If you were born after 6 April 1960, you must wait until your 55th birthday. There are some circumstances in which retirement pensions may be taken at a younger age, but they are limited.
A personal pension can be taken without retiring, so if you wish to continue working past retirement, you can supplement your income by taking your pension. In some circumstances, it may even be possible to contribute to a pension plan whilst drawing benefits from it at the same time.
Most modern pension funds are split into sub-funds, which can be taken independently of one another, offering still more flexibility. For example, a pension fund split into ten sub-funds may be able to be taken as ten separate annuities, with a tax-free lump sum taken from each.
There is also a variety of options available regarding the draw-down of the pension funds, which permits a great deal of planning of income to be done.
The opportunities for using pension funds to maximise your after-tax income are limited after the age of 75. However, at ages below 75, pension fund planning and the planning relating to the taking of pension benefits can be a significant part of an income and wealth-planning strategy.