Annual Reviews

As already explained, the amount of income you can withdraw is subject to an upper limit. This limit is calculated under rules set by HM Revenue & Customs (HMRC) (formerly the Inland Revenue) and standard actuarial tables prepared by the Government Actuary’s Department (GAD). You can choose an income anywhere between zero and the upper limit. There is a statutory requirement for the limits to be re-calculated every five years, until you buy an annuity or go into ASP.

Five years is a long time and therefore the Alexander Forbes standard practice is to review your plan with you annually. At each annual review your Alexander Forbes Consultant will check the progress of your plan and discuss this with you, taking into account any changes in your own circumstances. Your consultant will suggest a suitable course of action for you, depending on the results of the review.

At each statutory five-year review, we will advise you of the revised limits. This may mean that you will have to increase or lower your income to keep within the maximum. Rises and falls in the value of investments will also affect your income levels. High income levels may not be sustainable if the value of your underlying investment falls. Taking withdrawals may erode the capital value of your fund and result in lower income in the future.

You can make changes to your USP plan, such as varying the amount of income you are withdrawing or changing the funds your pension is invested in. If you and your Alexander Forbes Consultant decide the time is right, you can use the money that is left in your pension fund to buy a lifetime annuity from which you will get your pension income. Your USP stops at this point.

Annuity rates usually rise with age, so if you delay buying an annuity you might expect a slightly higher annuity rate than you would have got if you had bought a lifetime annuity when you retired. But because people are on average living longer it could be risky to assume that annuity rates will be higher in future. You should be aware that annuity rates could fall or rise for various reasons. It is possible that when (if) you purchase an annuity, annuity rates may have reduced to a lower level than at present.