Since April 2015 there has been more choice as to how people can use their retirement savings. The Allen & Overy Pension Scheme provides the following options:
- Take 25% of your retirement savings account as a tax free lump sum and purchase an annuity with the remainder;
- Take all of your retirement savings account as cash; 25% of this would be tax free and the balance will be taxed at your marginal rate;
- Transfer your retirement savings account to another pension arrangement which may offer more choices.
You can select one or a combination of these options but you must use the whole of your DC retirement savings account in one go. If you want to take your benefits in stages (income drawdown) you will need to transfer to another pension arrangement.
Members who have benefits under both the Defined Benefits and Defined Contributions sections of the scheme can take their DB and DC benefits, or transfer out, at different times.
HR Advice can request details of your benefits from the Scheme Administrator. Alternatively, you may request this information direct from the Scheme Administrator.
If you choose to purchase an annuity, the amount you will receive depends on a number of factors:
- The realised value of your retirement savings account at the purchase date, less any cash sum that you have decided to take;
- The type of annuity you purchase, in particular, any increases you would like to receive once your annuity starts, any benefits you wish to provide for your dependants and possibly your state of health;
- The cost of providing an annuity at the time of purchase. This tends to move in line with interest rates so that the higher the current rates of interest the lower the cost of the annuity and vice versa.
If you carry on working for the Firm after your 65th birthday, your right to use your account will be deferred until you retire but you can ask the Firm for earlier payment.
*If you are a DC member who joined the Scheme before 1 April 2010, you have the right to claim your retirement savings account at age 62. If you continue as an employee of Allen & Overy after age 62 you may continue in membership of the DC Section on the same terms as applied before age 62.
If you have left the Firm, or are no longer an active member of the Scheme, you will require the approval of the Trustee to early payment.
Your retirement savings account may be taken before age 55 on the grounds of incapacity as set out in the Schemeís rules.
Legislation also prescribes an Annual Allowance. In the context of a DC arrangement, this is the maximum total annual contributions that can be paid to all your pension schemes by you or your employer without incurring a tax charge For the 2016/17 and 2017/18 tax years this is £40,000 for most people, but it will be less for those whom the pensions tax regime deems to be on "high income". Broadly speaking, if your total taxable income is above £110,000 (which includes any taxable income from outside of your Allen & Overy employment) in a tax year, then you could have a personal Annual Allowance which is below £40,000. The Firm as your employer does not have visibility of all your income so you will need to calculate what your personal Annual Allowance limit is. The Firm wrote to you in 2016 explaining this in detail. If you think your total contributions will exceed this amount in one tax year, please contact the HR advice team to discuss your options.