How it works

To facilitate phased retirement, your pension funds are consolidated into one plan, which, in turn, has many segments, typically 1,000.

Each year the appropriate number of segments are encashed to provide the amount of income you require. For example, in year 1 you decide on the income you require, and this is provided by the encashed segments, part of which will buy an annuity or income drawdown plan, the balance of the income being provided by tax-free cash from that segment(s). The remaining untouched segments continue to benefit from being invested.

In year 2 and every year after that, you can repeat the process.

You can phase your retirement in this way until your 75th birthday, when any remaining segments must be used to buy an annuity (after you’ve taken any tax-free cash).

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