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Financial > Pensions > Self Administered
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This is a type of company pension scheme reserved for directors and their families because the risks involved can be quite high. People who choose this type of pension want more control over the things that their pension fund is invested in and so they play an active part in managing their own portfolio.
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An independent trustee is appointed to make sure that all investments and withdrawals remain within the limit imposed by the government - and as a further safeguard, all assets have to be registered in the joint names of all trustees, including the independent trustee.
There are no guarantees with this type of pension, and when the member reaches retirement they have a choice to make.
For complete security it is possible to take the money from the pension fund and purchase an annuity, which is simply a guaranteed income for life. A smaller income can be taken in exchange for a lump sum payment which is currently tax-free and you can design the annuity in a variety of ways to suit your personal needs. For example, there could be an income for someone else who survives you for the remainder of their life, a minimum payment period or even some provision to offset the effects of inflation each year, and better rates are available if you have impaired health when making your claim.
In exchange for the guarantee that comes with an annuity, the entire pension fund is given away to an insurance company and so there is nothing left for your friends and family when the income payments stop.
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If you are happy to leave your pension fund invested beyond your retirement date, you can withdraw an income from the pension fund itself under a system known as an Alternatively Secured Pension. The level of income allowed by the government is usually higher than the best annuity rates within the open market, and you are obliged to review the level of those withdrawals at least once every 5 years.
It is important to bear in mind that if you set the withdrawal at a high level, your investments will need to grow at a correspondingly rapid rate simply to maintain the value of your pension fund - and therefore the income available to you in the future. To obtain a rapid rate of growth you will need to take a higher degree of risk and this is not an option which is suitable for everyone.
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You are free to move into an annuity at any stage in the future, and there is also the option to take a retirement lump sum too. But if you leave the pension fund invested, then the entire pension fund will be available for your survivor to have an income during the remainder of their life, and 39% of the remaining fund when they die can be paid to your friends, family or other selected beneficiaries if Inheritance Tax is payable on the remainder of your Estate anyway.
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